FOREX-Yen jumps, peso tumbles on Trump's tariff threat on Mexico

By Richard Leong

* Trump threatens tariffs on Mexico over illegal immigration * Mexican peso set for worst day since October * Traders pile on bets on U.S. rate cuts by year-end * Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh (Updates market action, adds quote) By Richard Leong NEW YORK, May 31 (Reuters) - Investors rushed into the perceived safety of the Japanese yen on Friday, with the currency scoring its best day against the dollar in four months, after U.S. President Donald Trump's threat to impose tariffs on Mexico roiled financial markets and stoked recession fears. Taking aim at what he said was a surge of illegal immigrants across the southern border, Trump vowed on Thursday to impose a tariff on all goods coming from Mexico, starting at 5% and ratcheting higher until the flow of people ceases. The Mexican peso tumbled against the greenback, losing as much as 3.4% at one point, for its steepest single-day loss since October. It was down 2.65% at 19.6485 per dollar. Trump's surprise duties on Mexican imports "spurred sharp losses in the Mexican peso and a general risk-off move that strengthened the yen," said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC. Several different currencies have served as safe havens during the global trade conflict, but the yen has consistently been among the strongest this year, and on Friday investors appeared to opt for the Japanese currency. The yen increased 1.11% at 108.41 per dollar and 0.75% per euro. For May, the Japanese currency was on track to gain 2.72% against the dollar and 3.15% versus the euro. The Swiss franc also enticed safe-haven buying, rising 0.69% at $1.0008, near its strongest versus the dollar since April 10. The impact of escalating trade tensions between Washington and Beijing is starting to show up in economic data, with a key measure of Chinese manufacturing activity disappointing investors, and Trump's latest salvo fueled a rush on Friday to safe-haven assets such as government bonds and the yen. The U.S. dollar has itself served as a safe haven currency in recent times, but on Friday, it fell 0.34% against a basket of other currencies, hovering below a two-year peak reached last week. For the month, the dollar index was on track for a 0.4% gain, extending its winning monthly streak to four. "The U.S. dollar may be embarking on a major turning point," said Jack McIntyre, portfolio manager at Brandywine Global. The dollar's broad losses on Friday were compounded by comments from senior policymakers, with the U.S. Federal Reserve Vice Chair Richard Clarida on Thursday discussing the possibility of rate cuts should the world's biggest economy take a turn for the worse, though he also said he thought the U.S. economy is in "a very good place." U.S. interest rates futures implied traders expect at least one rate cut from the Federal Reserve by year-end. Goverment data on Friday showed a modest pickup in inflation in April, while a private report indicated a stronger-than-forecast improvement in U.S. Midwest manfacturing activity in May. ======================================================== Currency bid prices at 2:55PM (1855 GMT) Description RIC Last U.S. Close Pct YTD Pct High Bid Low Bid Previous Change Change Session Euro/Dollar EUR= $1.1167 $1.1130 +0.33% -2.63% +1.1179 +1.1126 Dollar/Yen JPY= 108.3900 109.6000 -1.10% -1.70% +109.6200 +108.4000 Euro/Yen EURJPY= 121.07 121.98 -0.75% -4.08% +122.0300 +120.9300 Dollar/Swiss CHF= 1.0006 1.0076 -0.69% +1.96% +1.0081 +1.0002 Sterling/Dollar GBP= 1.2633 1.2606 +0.21% -0.97% +1.2638 +1.2560 Dollar/Canadian CAD= 1.3520 1.3498 +0.16% -0.86% +1.3564 +1.3493 Australian/Doll AUD= 0.6938 0.6911 +0.39% -1.57% +0.6944 +0.6902 ar Euro/Swiss EURCHF= 1.1176 1.1214 -0.34% -0.69% +1.1221 +1.1172 Euro/Sterling EURGBP= 0.8840 0.8825 +0.17% -1.61% +0.8874 +0.8820 NZ NZD= 0.6541 0.6509 +0.49% -2.62% +0.6547 +0.6499 Dollar/Dollar Dollar/Norway NOK= 8.7481 8.7691 -0.24% +1.27% +8.7945 +8.7372 Euro/Norway EURNOK= 9.7718 9.7623 +0.10% -1.35% +9.8034 +9.7517 Dollar/Sweden SEK= 9.4857 9.5349 -0.13% +5.82% +9.5642 +9.4812 Euro/Sweden EURSEK= 10.5964 10.6099 -0.13% +3.24% +10.6645 +10.5933 (Additional reporting by Abhinav Ramnarayan in LONDON Editing by David Holmes, Stephen Powell and Tom Brown)