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Yen spikes in March

March 2018

President Trump’s proposed trade tariffs on steel and aluminium knocked investor sentiment in Asia during March, amid fears of a trade war. The Japanese yen spiked against the US dollar to reach its highest level since the second half of 2016

  • Japan’s industrial output rebounded 
  • Relations between the US and North Korea thawed slightly
  • Australia’s economy grew by 2.4% over 2017

To view the series of market updates through March, click here


President Trump’s proposed trade tariffs on steel and aluminium knocked investor sentiment in Asia during March, amid fears of a trade war. The Japanese yen spiked against the US dollar to reach its highest level since the second half of 2016; the yen is widely regarded as a “safe haven” currency in unsettled periods, and concerns about the possibility of a trade war undermined investor confidence. Over the month as a whole, the Nikkei 225 Index fell by 2.8%, the Topix Index declined by 2.9%, and the TSE Second Section Index fell by 2.8%. 

“Concerns about the possibility of a trade war undermined investor confidence”

Having fallen heavily in January, Japan’s industrial production rallied during February, rising at a month-on-month rate of 4.1% compared with the previous month’s drop of 6.8%. The news boosted optimism towards Japan’s prospects for economic growth. Japan’s labour market remains tight, although the jobs-to-applicants ratio dipped slightly to 1.58 in February. 

Having expanded at an annualised rate of 2.8% in the third quarter of the year, Australia’s economy grew by 2.4% over 2017 as a whole, unchanged from its growth of 2.4% in 2016. A slowdown in construction and net exports was mitigated to a degree by improved household consumption. Average earnings strengthened over the period, rising at an annualised rate of 1.1%. Australia’s rate of inflation rose at 1.9% year on year in the last three months of 2017, below the Reserve Bank of Australia’s (RBA’s) target of 2-3%. Policymakers at the central bank left its key interest rate unchanged at 1.5% for yet another month. The ASX All Ordinaries Index fell by 4.1% during March. 

Having grown at a quarterly rate of 1.4% in the third quarter of 2017, South Korea’s economy contracted by 0.2% during the fourth quarter. An increase in private consumption was not enough to offset the effects of weaker exports and construction. Over 2017 as a whole, South Korea’s economy expanded by 3.1%. Nevertheless, investor sentiment received a boost in March from signs of improving relations between the US and North Korea and the benchmark Kospi Index rose by 0.8% in March. 

During March, 11 countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam – signed the Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP). This pact replaced the agreement previously known as the Trans-Pacific Partnership (TPP), which the US left in 2017.


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