Yen drops towards 2019 low as bullish mood hits safe havens

  • The Japanese yen and Swiss franc fall as a rally in global markets cuts into demand for safe haven currencies.
  • An upbeat assessment of the global economy from the IMF last week helped global investment sentiment.
  • Data out of the world's biggest economies also signaled a recovery.
Tomohiro Ohsumi | Bloomberg | Getty Images

The yen fell towards a 2019 low on Monday and the Swiss franc reached its weakest in nearly a month as a rally in global markets cut into demand for currencies considered safe havens.

Market volatility has eased to multi-year lows in recent weeks and moves were again muted at the start of the week, though optimism over U.S.-China trade negotiations and strong Chinese economic data seemed to be pushing investors into riskier currencies.

The yen fell as low as 112.09 per dollar in Asian trading, near a 2019 low of 112.135, before recovering slightly.

"USD/JPY is testing the 112.00 level and we expect the cross to break above this level this week in response to solid US data and stabilising risk appetite," ING analysts said in a note.

The Swiss franc also eased against the euro, to 1.1344 francs.

It has dropped 1.5 percent from its 2019 high of 1.1164 francs in late March.

An upbeat assessment of the global economy from an International Monetary Fund meeting last week has helped global investment sentiment.

The optimism was bolstered by U.S. Treasury Secretary Steven Mnuchin, who said he hoped U.S.-China trade talks were approaching a final lap.

Data out of the world's biggest economies also signaled a recovery. On Friday, China reported exports rebounded and new bank loans increased more than expected in March.

The dollar index dropped 0.1 percent to 96.858, while the euro rose 0.1 percent to $1.1309.

Although the dollar tends to underperform when risk appetite grows, data on Friday showed speculators bolstered their net long dollar position in the latest week. It's now at its highest since December 2015, while traders remain short the euro.

Encouraging flash purchasing managers' index surveys in the euro zone on Thursday could squeeze euro shorts and push the single currency higher, Societe Generale analyst Kit Juckes said.

"If that helps drag the Bund yield a bit higher, the euro will surely follow it, as it has done for the last year," he said.

Euro/dollar has been stuck in a very narrow range in 2019 after a dovish shift in the Federal Reserve's monetary policy outlook was offset by the European Central Bank's similar stance and worries about worsening economic momentum in the euro zone.

Sterling rose to $1.31, bobbing around the same levels it has for much of the past week. Volatility has fallen sharply in the pound since the European Union and British government last week delayed Brexit until October.

The Australian dollar, a barometer of investor sentiment, was unchanged on the day at $0.7173 but close to a 1-1/2 month high.