Yen falls past 110 to eight-month low as US-China ties improve

The yen weakened past 110 per dollar for the first time in almost eight months as the imminent signing of a U.S.-China trade deal sapped demand for haven assets.

Japan’s currency fell as much as 0.2% to 110.21 per dollar as the Trump administration removed its designation of China as a currency manipulator before Wednesday’s planned signing of a phase-one agreement.

“The dollar-yen rose to 110 amid improved risk sentiment and technical momentum,” said Kumiko Ishikawa, currency analyst at Sony Financial Holdings Inc. in Tokyo. “Whether it will extend its advance further depends on fresh catalysts including U.S. data and the extent of rise in U.S. yields.”

The change in the U.S. Treasury Department’s semiannual foreign-exchange report suggests the partial trade deal with China is in the bag, removing a key risk for global markets. The yen has now weakened about 1.4% versus the dollar this year, having erased all its advance in 2019.

China has made “enforceable commitments” not to devalue the yuan and has agreed to publish exchange-rate information, according to the Treasury report.

The U.S. decision to label China a currency manipulator in August had helped escalate the trade war between the two nations. It came about after China’s central bank allowed the yuan to weaken in retaliation to new American tariffs.

The yen’s haven appeal has also been dented by easing U.S.-Iran tensions, which saw it slump last week by the most since October.

“At these yen levels, Japanese investors will be reluctant to actively buy foreign bonds without currency hedges, so the pace of such purchases may slow,” said Eiichiro Miura, general manager of the fixed income department at Nissay Asset Management Corp. in Tokyo. “There is more scope for dollar-yen upside as market sentiment is likely to remain positive for a while.”