Yen holds gains on US-Europe trade tension, Brexit summit

Broader sentiment in the market remained subdued as the flare-up between the United States and Europe added to other potential global flashpoints over trade, including ongoing Sino-U.S. tariff negotiations.

“Now, there are battles on two fronts for the U.S.,” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.

“If they’re going to be driving the global economy, it’ll be inherently more difficult if they’re fighting all these trade wars…on multiple fronts,” he said.

The dollar was basically unchanged at 111.17 yen, paring a slight loss earlier. The U.S. unit has fallen almost two-thirds of a percent from a more than three-week high of 111.825 yen brushed on Friday last week.

Against a basket of key rival currencies, the dollar was steady at 97.017, after giving up 0.35 percent overnight.

On Monday, the U.S. Trade Representative proposed a list of European Unionproducts ranging from large commercial aircraft and parts to dairy products and wine on which to slap tariffs as retaliation for European aircraft subsidies.

The IMF on Tuesday slashed its global growth forecasts for 2019 to 3.3 percent, the slowest expansion since 2016 and from its earlier projection of 3.5 percent in January.

The global lender said a sharp downturn could require world leaders to coordinate stimulus measures.

Investors’ immediate focus on Wednesday will be on a European Central Bank meeting and the release of minutes of the Federal Reserve’s last policy meeting.

Ahead of a Brexit summit meeting later on Wednesday, the euro and sterlingboth were essentially unchanged, trading at $1.1266 and $1.3052, respectively.

European Union leaders will likely grant Prime Minister Theresa May a second delay to Britain’s exit from the EU but they could demand she accepts a much longer extension as France pushed for conditions to limit Britain’s ability to undermine the bloc.

The latest IMF forecasts, together with a pullback in oil prices, put pressure on commodity-linked currencies such as the Australian and Canadian dollars.

The Aussie was essentially unchanged at $0.7128 after coming off a more than two-week high during the previous session. The loonie was flat at $1.3330 after retreating from its strongest since March 21 overnight.