SYDNEY, Aug 12 (Reuters) - The dollar remained on the defensive against the safe-haven yen on Monday as the Sino-U.S. trade dispute looked set to drag on with no settlement in sight, while holidays in Japan and Singapore made for very thin trading.
Confusion still lingered after U.S. President Donald Trump on Friday said he was not ready to make a deal with China and even called a September round of trade talks into question.
Goldman Sachs over the weekend cut its forecast for U.S. economic growth, warning that a trade deal was unlikely before the 2020 presidential election and that the risks of a recession were increasing.
“Overall, we have increased our estimate of the growth impact of the trade war,” the bank said in a note.
All eyes will be on Chinese figures on retail sales and industrial output due Wednesday to gauge the impact of the long-running tussle on domestic activity.
Beijing has allowed its yuan to ease in recent weeks as an offset to the tariffs, pressuring emerging market currencies across Asia and boosting the yen.
The dollar edged up to 7.1034 yuan in offshore trade early on Monday as investors waited to see where the Chinese central bank would chose to fix it.
The dollar went the other way against the yen, easing to 105.40 after hitting a seven-month low around 105.25 on Friday. The dollar was hardly alone, with the euro down at 118.16 yen and near its lowest since April 2017.
Likewise, sterling had sunk to depths not visited since 2016 at 126.69 yen having shed over eight yen in little more than two weeks.
The pound struck a two-year trough on the dollar on Friday after data showed the UK economy unexpectedly contracted in the second quarter, only adding to the bearishness over Brexit and the chance of a no-deal exit.
Sterling was last at $1.2020 and eyeing support at $1.1979, which marks a low from January 2017.
The Telegraph reported Labour MPs had been told to cancel all travel in early September in anticipation of Jeremy Corbyn tabling a motion of no confidence in the government.
The euro was steady on the dollar at $1.1200, bound between resistance at $1.1249 and support at $1.1175.
Politics remained a drag with the prospect of snap elections in Italy up in the air as opposition built to League chief Matteo Salvini’s plans for a vote.
Another hurdle will be Germany’s gross domestic product figures on Wednesday where a contraction is a real risk given a steep drop in factory output in June. (Reporting by Wayne Cole; Editing by Sam Holmes)