The yen leads gains as risk currencies lag amid a weaker yuan/trade worries
Despite a pullback in earlier gains, the yen is still the leading major currency on the day as USD/JPY now trades at 105.20 after an earlier retracement from 104.46 to 105.80.
That came about a firmer PBOC yuan fixing and some "positive" commentary by China's Liu He on trade. Take note of the inverted commas because the remarks hardly offers much optimism amid the escalation in trade tensions since Friday.
Despite a firmer yuan fixing, the Chinese currency is still trading much weaker on the day and with bond yields and equities sliding, it is putting pressure on risk currencies. The aussie and kiwi are the two that is bearing the brunt of the beating so far today.
Other major currencies hold more steady against the dollar but be wary that the risk mood continues to remain on the defensive ahead of European trading.
As such, I reckon we are more likely to see another wave of risk aversion than a potential rebound as European assets are set to join in on the dour mood in markets currently.
