The U.S. dollar and Japanese yen moved higher against other major currencies on Friday as worries over escalating drama at a G-7 summit sparked a flight into assets perceived as havens.
The move was triggered by a Twitter feud between President Donald Trump and longstanding U.S. allies Canada and those in the European Union.
What are currencies doing?
The ICE U.S. Dollar Index DXY, +0.11% rose 0.3% to 93.705, set to break a three-day losing run. Still, for the week, the index is looking at a 0.4% drop. A broader gauge of the greenback, the WSJ Dollar Index BUXX, +0.07% was up 0.2% at 86.95.
Japan’s yen USDJPY, -0.22% was one of the few major currencies gaining against the dollar on Friday, with the buck buying ¥109.45 down from ¥109.70 late Thursday in New York.
The euro EURUSD, -0.1864% slid to $1.1768 from $1.1800 late Thursday in New York, when the shared currency traded around its highest since mid-May.
The British pound GBPUSD, -0.1192% dropped to $1.3390 from $1.3421 on Thursday.
The U.S. currency gave back its gains versus the Canadian dollar USDCAD, -0.1619% after Canada’s Labor Force Survey showed a 3.9% jump in wages in May, even though seasonally adjusted jobs fell. The greenback last fetched C$1.2967, slightly down from C$1.2974 late Thursday.
Also see: Here’s what’s next for Nafta, Mexico’s peso and Canada’s dollar
In emerging markets, Argentina’s peso USDARS, +1.8408% declined by almost 2%, marking a historic low against the U.S. dollar, with the buck buying 25.4340 pesos up from 24.9837 in the prior session. Argentina and the International Monetary Fund agreed to a $50 billion credit line late Thursday to stem a further selloff in the currency.
Read: Argentina may be headed for another currency crisis
Another EM currency that felt the pain of the stronger dollar on Friday was the South African USDZAR, +0.5938% which hit a six-month low versus the U.S. tender. One dollar last bought 13.1408 rand, up from 13.0171 rand late Thursday in New York.
Check out: Here’s why emerging-market investors are swooning over Colombia’s peso
Also read: Turkey delivers another rate increase, sending currency soaring
What is driving the market?
Traders moved into the dollar and yen as they braced for the summit of leaders that head the Group of Seven advanced economies in Quebec. Rhetoric centered on the Trump administration’s protectionist policies intensified ahead of the gathering, with a complaint about “unfair” trade policies from the U.S. president eliciting harsh responses from France and others.
Why isn’t the European Union and Canada informing the public that for years they have used massive Trade Tariffs and non-monetary Trade Barriers against the U.S. Totally unfair to our farmers, workers & companies. Take down your tariffs & barriers or we will more than match you!
— Donald J. Trump (@realDonaldTrump) June 8, 2018
See: Trump lashes out at Canada, France over trade—and will bail on G-7 summit early
“The American President may not mind being isolated, but neither do we mind signing a 6-country agreement if need be,” French President Emmanuel Macron said in a tweet on Thursday.
“Because these 6 countries represent values, they represent an economic market which has the weight of history behind it and which is now a true international force,” Macron said, pointing out that the six other members of the G-7—Canada, Italy, Germany, France, Japan and U.K.—added together make up a bigger market than the U.S.
Trump plans to leave the G-7 summit early to attend a scheduled meeting in Singapore with North Korea leader Kim Jong Un on Tuesday.
The euro added to its broad-based declines following around of disappointing data. German industrial production unexpectedly fell in April while exports declined.
What are strategists saying?
“Major bond yields are beginning to fall away as a slight tilt back into safer haven assets has taken hold this morning ahead of the G-7 meeting in Canada. This is helping to support the Japanese yen but also the dollar is showing some signs of support too after a tough few days for the greenback,” said Richard Perry, market analyst at Hantec Markets, in a note.
What’s on the economic calendar?
Wholesale inventories rose at 0.1% in April, compared with 0.3% previously.
There are no Fed speakers, as the central bank is in a blackout period before the Federal Open Market Committee meeting next week.