By Yadarisa Shabong and Ankur Banerjee
(Reuters) -The Japanese yen and Swiss franc strengthened against the dollar on Monday, as traders flocked to safe haven currencies due to lingering worries over tariffs and a U.S. economic slowdown, while the euro steadied after a strong run last week.
Following a volatile week that saw the euro’s biggest weekly gain since 2009 after Germany’s game-changing fiscal overhaul, the common currency edged 0.1% higher against the dollar and hovered near its four-month high as the markets awaited details on European spending.
“We’ve seen a lot of news from Germany on defence and infrastructure, but the feeling is that there’s going to be some follow through,” said Samy Chaar, chief economist at Lombard Odier.
Markets have also been fixated on trade tensions as U.S. President Donald Trump slapped tariffs on top trading partners only to delay some of them for a month amid fears of a U.S. economic slowdown.
That has led to some investors losing faith in the U.S. economy which has been outperforming its peers.
On currency futures markets, investors have slashed net long dollar positions to $15.3 billion from a nine-year high of $35.2 billion in January.
YEN, SWISS FRANC SOUGHT
Risk-averse investors have sought the Japanese yen and Swiss franc instead, sending both currencies to multi-month highs. On Monday, the yen was 0.58% firmer at 147.19 per dollar, just below the five-month high of 146.94 it touched on Friday.
“We still favour the JPY to outperform as we think wage discussions and the shunto (spring wage talks) announcement on Friday should solidify the wage-inflation cycle that will keep the BOJ on a hawkish path ahead,” said Dominic Bunning, global forex strategist at Nomura.
Japan’s real wages fell in January after two months of slight gains, data showed on Monday, days before the annual spring rounds of pay talks culminates at major firms.
The Bank of Japan is widely expected to keep interest rates unchanged at its next policy review on March 18-19.
The Swiss franc hit a three-month high of 0.87665 per dollar on Monday.
The dollar index, which measures the U.S. currency against six others, was last at 103.98, stuck near a four-month low touched last week.
The dollar fell more than 3% last week against major rivals, clocking its weakest weekly performance since November 2022.
EYES ON INFLATION
“If Trump is looking to pursue a weaker dollar, lower yields … then certainly that adds to this idea that maybe the dollar can’t strengthen or can’t move aggressively higher,” said Parisha Saimbi, Asia-Pacific rates and FX strategist at BNP Paribas in Singapore.
Investors were also digesting data from Friday that showed U.S. job growth picked up in February, but cracks are emerging in the once-resilient labour market amid a chaotic trade policy.
Eyes will now be on U.S. inflation data due on Wednesday.
Traders are pricing in 75 basis points of cuts from the Fed this year, LSEG data showed, with a rate cut fully priced in for June.
In other currencies, the Norwegian crown gained against the dollar and the euro. It was at its highest against the dollar since October at 10.7442 crowns after surging inflation sowed doubts about the central bank’s plans to start cutting borrowing costs in March.
China’s yuan slipped on Monday after data over the weekend showed consumer price index in February fell at the sharpest pace in 13 months.[CNY/]
(Reporting by Yadarisa Shabong in Bengaluru and Ankur Banerjee in Singapore, additional reporting by Tom Westbrook in Singapore; Editing by Bernadette Baum)
