Haven assets surges on political uncertainties

Last week, the Dollar slipped against its peers after news that US producer prices unexpectedly fell in July, recording their biggest drop in nearly a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase. Investors are somewhat skeptical that the Fed will deliver another rate hike by December, given that its preferred annual inflation reading in recent months has fallen to, and remained at 1.5%, which is below a 2% target.

However, in a speech last Thursday calling on the United States to do more to curb growing racial inequality of employment and income, New York Fed President William Dudley suggested that the Central Bank was on track to raise interest rates once more and begin shedding some Bond holdings this year.

Meanwhile, the safe-haven Yen jumped to an eight-week high against the US Dollar as escalating tensions between the United States and North Korea triggered yet more investor flight to safety. Rising geopolitical tensions were heightened further when Donald Trump warned Pyongyang that it should be “very, very nervous” if it even thinks about attacking the United States or its allies, after Pyongyang said that it was making plans to fire missiles over Japan to land near the US Pacific territory of Guam.

Last week as well, the Canadian Dollar hit a fresh four-week low against a weaker US currency, hurt by sharp losses on Wall Street and a fall in the price of Oil as US-North Korea tensions escalated. The Loonie has pulled back against the US currency in recent weeks after hitting its strongest since mid-2015 at C$1.2414 late last month as investors adjusted to a more hawkish turn from the Bank of Canada.