Morning Bid: De-risking, seeking safety as Middle East tensions rise
Asian markets are set to open on the defensive on Monday, with heightened tensions in the Middle East spurring strong demand for safe-haven assets like the dollar, gold and U.S. Treasuries at the expense of stocks and local currencies.
In such a febrile environment local Asian economic indicators and events are likely to take a back seat. Monday's calendar is pretty light, with only Indian trade and wholesale price inflation data, and Japanese machinery orders on tap. The yen is traditionally seen as a 'safe-haven' asset that does well in times of heightened risk aversion, boosted by large repatriation flows from Japanese investors and short covering from currency traders using the yen to fund carry trades.
Perhaps Tokyo has not yet intervened because the yen's slide is fully justified on"fundamental" grounds - U.S. yields and implied rates are rising faster than their Japanese equivalents because U.S. growth and inflation rates are higher than Japan's.
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