Yen vs dollar; Swiss franc vs euro shows positive signs

The Swiss franc rallied to its highest levels in nearly two years against the euro on Monday as U.S. President Donald Trump hardened his trade stance to countries beyond China, prompting investors to move into perceived safe-haven currencies. Trade tensions have grabbed centre stage for investors in recent weeks after Trump increased tariffs on Chinese imports, threatened to raise tariffs on Mexican imports and removed preferential trade treatment for India.

Rising strains on trade have prompted investors to dump risky assets such as equities and flock to low-yielding currencies such as the yen and the franc with the latter flirting close to levels where the Swiss National Bank has traditionally intervened to keep the currency weak. "While the Swiss franc has appreciated strongly in recent weeks, much of that gains are due to the wave of risk aversion sweeping across markets and we need to see further substantial gains before the central bank has to step in," said Manuel Oliveri, a currency strategist at Credit Agricole in London.

Against the euro, the franc rallied 0.2% to its highest level at 1.1146 francs per euro after strengthening more than 2% in May, its biggest monthly rise in eight months. The Swiss National Bank, which pursues a monetary policy of negative interest rates and currency intervention, has traditionally intervened when the franc has risen to around 1.10 francs per euro but low inflation and trade tensions suggest the franc has to gain far more from current levels.

Latest data indicate price pressures remain well contained with consumer prices rising 0.6 per cent in May from a year-ago period. The franc wasn't the only low-yielding currency to shine, with the Japanese yen also broadly gaining against a swathe of currencies.

On Friday, the Japanese currency had booked its sharpest daily rise in more than two years, climbing a little over 1.2% during the session. It was up 0.2% versus the pound and 0.1% against the euro on Monday. A senior Chinese official and trade negotiator said on Sunday Washington cannot use pressure to force a trade deal on China and refused to be drawn on whether the leaders of the two countries would meet at the G20 summit in Japan at the end of the month to bash out an agreement.

The dollar dipped after benchmark 10-year U.S. Treasury yields hit as low as 2.121% on Monday, their lowest since September 2017. Against a basket of six major currencies, the dollar was slightly negative at 97.71, though it is still up 1.6% for the year.

(With inputs from agencies.)