Japanese Yen and Gold Gain amid Afghanistan Tension
- JPY advances across the board, USD/JPY slips 0.4%, GBP/JPY lower by 0.5%
- Gold moves higher as unrest in Afghanistan prompts investors to seek a safe haven
Japanese Yen and Gold Gain
The Japanese yen rose on Monday, along with gold, as political unrest in Afghanistan and weaker-than-expected data from China reverberated across the financial markets. The continued and rapid spread of the Delta variant of the coronavirus also weighed on the positive mood. This prompted investors to hold back from placing aggressive bets on risky assets.
China’s July retail sales and industrial production were lower than forecast as the latest Covid-19 wave has begun to damage the world’s second-largest economy. Industrial production in China has increased 6.4% in July, on an annual basis. The figure failed to meet the 7.8% expected. Retail sales for July were up 8.5%, lower than the expected 11.5% jump year-on-year.
Meanwhile, the gains in the Japanese yen arrived as early as the market opened for trading and accelerated after the economic data from China was reported. The USD/JPY pair extended its slide into a fourth-straight day. On Monday, the exchange rate slipped to a session low of 109.11, and ended the day down by 39 pips, or roughly 0.4%, to 109.20.
Over the past four trading days, the USD/JPY has depreciated by more than 130 pips, or over 1.20% as the Japanese yen has gathered strong upside momentum. The GBP/JPY slipped 0.4% on Monday to a close of 151.40. The pair registered its third straight losing session.
Gold on Upward Trajectory Due to Political Tensions
Against the backdrop of rising political tensions in Afghanistan, gold prices continued on their upward trajectory on Monday. Gold reached a session high of $1,790 per troy ounce, and closed the day at $1,787, up to half a percent on the day, or almost $9.
The safe-haven asset has gained about 7% from its lowest point reached last Monday when the price slid to a five-month low of $1,670. Gold was quick to reverse the trend and is currently trading at $1,795, on pace to log its fifth day in positive territory.
Later in the week, currency traders will be looking toward the release of the Federal Reserve’s minutes from the last meeting between Fed officials held three weeks ago. Market participants will expect to get insights into the projected path for the US dollar in the short-term, particularly defined by Fed’s timeline to taper or scale down, its asset purchases. At the time of the release on Wednesday, heightened volatility in the currency market could be expected.
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