The dollar and yen moved higher against other major currencies on Friday as worries over what is shaping up to be a tense G-7 summit sparked a flight into assets considered safer than others.
The move was triggered by a Twitter feud between U.S. President Donald Trump and long-standing American allies Canada and the European Union.
What are currencies doing?
The ICE U.S. Dollar Index
rose 0.3% to 93.705, set to break a three-day losing run.
slid to $1.1731 from $1.1800 late Thursday in New York, when the shared currency traded around its highest since mid-May.
dropped to $1.3388 from $1.3421 on Thursday.
The Canadian dollar
fell to $0.7680 from $0.7708.
was the only major currency gaining against the greenback on Friday, with the buck buying ¥109.28 compared with ¥109.70.
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. Tensions flared up ahead of the gathering after a dispute erupted, mainly on Twitter.
“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 responded to Macron with pointed words, then followed up with tweets aimed at Canadian Prime Minister Justin Trudeau and the European Union:
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
The U.S. president is now planning to leave the G-7 summit early to go to Singapore ahead of his scheduled meeting there with North Korea leader Kim Jong Un on Tuesday.
The euro was further sold off after a round 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?
Friday will be a relatively quiet day for economic data. The major release is a reading on wholesale inventories for April, due at 10 a.m. Eastern Time.
There are no Fed speakers, as the central bank is in a blackout period before the Federal Open Markets Committee meeting next week.