The dollar has pulled back against the yen and euro on Friday as tensions between China and the U.S. triggered a flight-to-safety.
According to a U.S, defense official, the crew of a Chinese warship stole a drone from a U.S. oceanographic vessel in the South China Sea. The USNS Bowditch was in the waters approximately 100 miles off the Subic Bay port in the Philippines, when a Chinese naval ship that had been shadowing the Bowditch put a small boat in the water, and retrieved the U.S.-owned drone.
Although motivation for the action by the Chinese ship is unknown, there is speculation that it could be in retaliation to President-elect Donald Trump’s support of Taiwan.
The incident drove USD/JPY from 118.40 down to 117.50, and EUR/USD up from 1.04 back up to 1.0450/60, with both the euro and yen trading with solid gains.
By Travis Berry