Dollar drops versus yen amid growing trade tensions

The dollar lost ground against the yen on Wednesday. The potential introduction of 104% import tariffs on China by the US administration has unsettled global stock markets. The US President has shown no intention of abandoning plans to raise duties by an additional 50% on Chinese imports. Donald Trump also accused Beijing of manipulating the yuan to offset the tariffs, Reuters reports.

According to strategists at brokerage firm Pepperstone, the US economy could struggle to avoid a recession if Donald Trump imposes new duties on China.

Concerns about a US economic downturn weighed on the dollar against other currencies, as market participants returned to pricing additional Federal Reserve rate cuts.

Fresh losses in US equity markets and active selling of longer-dated US Treasury bonds boosted demand for safe-haven currencies, particularly the yen. This reflects Japan's relatively stable macroeconomic environment, according to Reuters.