The Japanese yen fell  in Asian trade on Monday against a basket of major rivals, resuming losses against the dollar after a short hiatus  on Friday, and plumbing five-week lows as the risk appetite improved in the global markets following progress in US-China trade talks.

The yen is also pressured by higher 10-year US treasury yields before important inflation data, which could provide clues on future Fed interest rate decisions.

The Price

The USD/JPY price rose 0.65% to 146.28, the highest since April 10, with a session-low at 145.70.

The yen rose 0.35% on Friday against the dollar, the first profit in three days away from recent four-week lows.

The yen lost 0.3% last week against the greenback, the third weekly loss in a row as the odds of a Japanese interest rate hike in June declined, while risk appetite improved.

US-China Trade Talks

The US and China ended a round of trade talks in Switzerland on Sunday amid positive signals from both sides on achieving progress on calming trade tensions.

US Treasury Secretary Scott Bessent described the talks as constructive and effective, with progress achieved in tackling disputed issues.

Both sides agreed on establishing a new mechanism for economic and trade discussions to fix future disputes in an orderly way.

Both sides didn’t reveal details yet, but a joint statement will be released on Monday.

US Yields 

US 10-year treasury yields rose 0.8% on Monday, expanding the gains for the third straight session and hitting a three-week high at 4.418%, underpinning the dollar.

It comes amid an improving risk appetite in the global markets and before important US inflation data for April tomorrow.

Gold prices rose on Friday as the dollar fell against most major rivals, while marking weekly gains even as trade tensions calmed. 

Trump wrote on his Truth Social platform that imposing 80% tariffs on Chinese goods looks like the right step, but the decision will be left in Scott Bessent’s hands before trade talks with China in Switzerland on Saturday.

Trump asserted that more trade deals with other countries will be reached soon without laying into details.

Otherwise, the dollar index fell 0.2% as of 20:29 GMT to 100.4, with a session-high at 100.8, and a low at 100.01.

On trading, gold spot prices rose 1% as of 20:30 GMT to $3337.6 an ounce, with a weekly profit of 3.1%.

The European Union is aiming to ban all Russian energy imports by the end of 2027, which was already talked about a lot before but no concrete measures were taken as Russia remained the EU’s second biggest gas supplier, and now a non-member state could frustrate EU efforts to disengage from Russian energy supplies.

The European Commission announced plans this week to completely stop all Russian natural gas imports, by banning member countries from signing new supply contracts with Gazprom and exiting current contracts without paying fines. 

The first problem is that not all EU members support such a step, with countries such Slovakia and Hungary vehemently opposing due to concerns that such a step would weaken the competitiveness of European companies due to higher costs. 

However, Turkey has gradually become a major gas center that contains a lot of Russian gas, with both Hungary and Slovakia getting their Russian gas supplies through a Turkey-Black Sea pipeline. 

Such a pipeline would likely prolong EU dependence on Russian gas, with Russian gas imports already increasing from 30% in 2021 to over 50% in 2024. 

Turkey imports a lot of Russian gas, with some used locally, and the rest is exported to south eastern Europe, with Turkey aiming at becoming a major regional center for natural gas through local production and conduit services between Russia and the EU.

Turkey already announced direct plans to replace Ukraine as the conduit territory for Russian gas exports to the EU, with Hungary alone expected to import 8 billion cubic meters this year, up from 6 billion in 2023, while Slovakia similarly planning to increase imports through revisions to its long-term contracts with Gazprom.

The Turkish pipeline and its role as an intermediary will likely frustrate EU plans to completely disengage from Russian energy imports, with Turkey representing a loophole that some eastern European countries will rely on to bypass laws aimed at restraining Russia. 

Oil prices rose on Friday and headed for weekly gains as the US-China trade tensions calmed down, while Britain announced a “historic” trade deal with Washington.

Brent crude rose 53 cents, or 0.84% to $63.37 a barrel, while US West Texas rose 51 cents, or 0.85% to $60.42 a barrel, with both up over 3% so far this week.

PVM analysts said the hopes for a US-China resolution for the trade war helped Brent prices surge over 3% on Thursday.

US Treasury Secretary Scott Bessent will meet senior Chinese officials on May 10 in Switzerland to discuss a potential end to the trade war, which would boost fuel demand. 

Recent Chinese customs data showed exports rose more than expected in April, while imports fell slower than expected, giving Beijing some support before the tariff negotiations.

China’s crude oil imports in April fell compared to March but were up 7.5% on a yearly basis, as government refineries stocked up during maintenance.

Separately, US President Donald Trump and UK Prime Minister Keir Starmer said Britain has agreed to cut tariffs on US imports in exchange for similar cuts in US tariffs on UK goods.

Otherwise, OPEC+ is planning to increase production again in June, heaping pressure on prices, while a Reuters survey showed OPEC production dipped in April as a drop in Libyan, Venezuelan, and Iraqi production outweighed planned production hikes.

Conversely, severe US sanctions on Iran could hurt supplies and boost prices once more, with the US imposing sanctions on a small Chinese refinery this week for buying Iranian oil.