USD/JPY weakens as investors seek refuge in the Yen amid weak US PMI data

• US May's ISM Manufacturing PMI fell to a fresh six-month low.
• USD/JPY extends losses on rising demand for the safe-haven Yen.
• The US Dollar falls against its major counterparts with Trump tariffs back in focus.
• The Japanese Yen benefits from its safe-haven appeal, with the USD/JPY pair trading below 143.00 at the time of writing.

The Japanese Yen (JPY) is gaining strength against the US Dollar (USD) on Monday, as investors seek refuge in the Yen's safe-haven appeal.

With renewed concerns surrounding US President Donald Trump's aggressive tariff policies triggering a wave of market caution, USD/JPY has extended losses, trading below 143.00 at the time of writing.

Trump tariffs weigh on US Dollar, tumbles to six-week low per DXY

One of the key factors driving the current weakness in the US Dollar is the growing anxiety surrounding the impact of President Trump's trade policies. The US has recently threatened to double tariffs on steel and aluminum imports from 25% to 50%, sparking fears of an escalating trade war. 

These moves are raising concerns among investors that the global economy could face slower growth, particularly as inflationary pressures from higher import costs could ripple through the economy.

Still in the United States, May's ISM Manufacturing Purchasing Managers Index (PMI) fell to 48.5, missing forecasts of a modest uptick to 49.5 and reaching a six-month low.

Trump's tariffs, coupled with the ongoing trade standoff with China and other major economies, have the potential to hinder US economic growth. If tariffs continue to rise, businesses may face higher input costs, potentially leading to reduced corporate profit margins and lower consumer spending. 

In contrast, the Japanese Yen is gaining ground. The Yen is considered a safe-haven currency, meaning that in times of global uncertainty, investors tend to move their assets into the Yen. Its safe-haven appeal has been particularly evident in the wake of the increasing US tariff threats and the uncertainty surrounding global trade.

As markets continue to digest the implications of Trump's tariff policies, the Yen has appreciated against the USD, with the USD/JPY currency pair dropping to key support levels. Japan's relatively stable economic and political environment, coupled with its strong industrial base and low inflation, continues to make the Yen an attractive alternative to riskier currencies during turbulent times.

Market participants are closely monitoring developments in US trade policy, as any new announcements regarding tariffs could trigger further volatility in the USD/JPY pair. The upcoming meeting between US President Trump and Germany's new Chancellor Friedrich Merz, expected to take place this week, could also add fuel to the ongoing uncertainty and influence the direction of the Dollar.