RTTNews - Monday in Asia, the dollar and the yen soared against their major counterparts as Asian stocks declined today after disappointing Japanese economic growth and U.S. consumer confidence reports.
Investors sought the safety of U.S. and Japanese currencies after data from the world's largest economy showed consumer confidence unexpectedly fell in August, dropping to its lowest level since March.
Reuters and the University of Michigan released their preliminary report on Friday showing that their consumer sentiment index fell to a reading of 63.2 in August from a reading of 66.0 in July. The decrease came as a surprise to economists, who had been expecting the index to increase to 69.0.
A government report showed this morning that Japan's economy grew for the first time in five quarters as a revival in exports and consumer spending helped the country climb out of its worst postwar recession.
But Tokyo stocks plunged today as the nation's GDP grew less than expected.
Japan's gross domestic product expanded by a price-adjusted 0.9% quarter on quarter in the April-June period, with the annualized 3.7% growth the first uptick in five quarters, but the mood remains quite negative with the figures falling short of expectations.
Gross domestic product expanded at an annual 3.7 percent pace in the three months ended June 30, following an 11.7 percent decline in the previous quarter, the Cabinet Office said today in Tokyo. Economists were looking for a 3.9% economic growth.
Japan's benchmark Nikkei 225 Index, which opened more than 75 points down at 10,521 this morning and plunged to 10,348.8, is currently trading at 10,298.77, down 298.56 points or 2.82% from its previous close. The Nikkei had ended at a 10-month high of 10,597 on Friday, gaining 80.1 points, or 0.76%.
Other Asian markets are also trading lower today, with Australia's S&P/ASX declining1.2%, South Korea's Kospi Composite falling 2% and Hong Kong's Hang Seng index trading 2.7% lower.
The dollar rose to a 5-day high of 1.4143 against the euro during early Asian deals on Monday. If the dollar gains further, it may find resistance around the 1.411 level.
The dollar jumped to a 12-day high of 1.4088 against the euro on August 12. Although the dollar edged down on Thursday amid disappointing U.S. retail sales and business inventories report, it reversed direction after touching a 6-day low of 1.4268. The dollar extended its uptrend on Friday and closed the week's deals at 1.4193.
In early Asian trading on Monday, the dollar climbed to a 5-day high of 1.6439 against the pound. This may be compared to Friday's close of 1.6535. On the upside, 1.639 is seen as the next target level for the U.S. currency.
The pound declined after Rightmove Plc, the owner of the U.K.'s biggest residential property Web site, said in a statement today the average cost of a U.K. home slipped 2.2 percent to 222,762 pounds after gaining 0.6 percent in July. That was the biggest drop since December.
On an annual basis, prices were down 3.1 percent - the same rate of decline as in the previous month.
After hitting a 23-1/2 -year high of 1.3507 on January 23, the U.S. currency lost 21% against the pound and reached a 9 1/2 -month low of 1.7045 on August 05 as a rally in stock markets, interest rate cut and stimulus packages by central banks and some encouraging economic reports around the world reduced demand for the safe-haven greenback.
But the dollar bounced back on August 06 as the pound plunged after the Bank of England surprised markets by expanding its quantitative easing program. Thus far, the dollar has appreciated 4% from a 9 1/2 -month low.
The dollar that closed last week's trading at 1.0730 against the Swiss franc strengthened to a 4-day high of 1.0768 in early Asian deals on Monday. The next upside target level for the dollar-franc pair is seen at 1.085.
During early Asian deals on Monday, the yen soared to a 13-day high of 94.42 against the U.S. dollar. The next upside target for the Japanese currency is seen around the 93.3 level.
The yen advanced 3% against the dollar last week as reports showed Japan's current account surplus and the machinery orders rose more than expected in June. The yen soared to a 10-day high of 94.44 against the dollar on Friday.
The yen jumped to an 18-day high of 133.63 against the euro in early Asian deals on Monday. If the yen moves up further, it may likely target the 133.0 level.
The yen has appreciated 4% against the euro after it touched a 1-month low of 138.73 on August 07. The euro declined against the yen last week despite reports showed that Germany and France clearly emerged out of recession in the second quarter.
The largest in the group, Germany, unexpectedly expanded 0.3% sequentially in the second quarter, which was the first growth since the first quarter of 2008. Meanwhile, the French economy surprisingly grew 0.3% in the second quarter on higher government spending and global demand, ending four straight quarters of economic contraction.
During early Asian deals on Monday, the yen rose to an 18-day high of 155.36 against the pound. On the upside, 153.9 is seen as the next target level for the Japanese currency.
The pound declined 4% against the yen last week as the Bank of the Bank of England said in its quarterly Inflation Report on August 12 that the CPI inflation is likely to drop further below its target in the coming months.
The BoE said that inflation is more likely to fall below 1% in autumn, requiring an open letter from the Governor to the Chancellor. Risks of inflation being above or below the 2% target at the two-year horizon are broadly balanced.
The pound's slide was also buoyed by an official data, which showed that the number of unemployed in the U.K. reached a 14-year high of 2.44 million in the three months to June as recession claimed thousands of jobs again.
Unemployment increased by 220,000 to 2.435 million in the three months to June, the biggest figure since 1995, the Office for National Statistics said. The jobless rate rose to 7.8%, the highest since 1996, from 7.1% recorded in the three months to March and a notch higher than the expected rate of 7.7%.
At last week's close, the pound-yen pair was quoted at 156.86.
The yen strengthened to a 5-day high of 87.80 against the Swiss franc during Asian deals on Monday. The next upside target level for the yen is seen at 87.1. The franc-yen pair closed Friday's trading at 88.46.
The yen that tumbled to near an 8-week low of 90.74 against the franc on August 07 has gained 3% since then.
The Swiss retail sales and the Euro-zone trade balance- both for the month of June are expected in the upcoming European session.
From the U.S., the Treasury Department is due to release a report on the flows of financial instruments into and out of the U.S. for June at 9 am ET.
At 1:00 pm ET, the National Association of Homebuilders' is scheduled to release the results of their survey on homebuilders' confidence for August.
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