The Japanese yen advanced versus all of its major counterparts on Monday as declines in global stock markets from China to the U.S. encouraged investors to sell higher-yielding assets and take refuge in Japan’s currency. The landslide victory on Sunday by the Democratic Party of Japan (or DPJ) also gave a boost to the yen on hopes that new policies will support consumer spending in an economy trapped in deflation and haunted by a weak growth outlook.
Euro traded sideways in Asia n fell to 1.4256 in European morning, dragged by weak opening in equities n cross selling versus Japanese yen. However, as trading volume was relatively thin n some traders were on the sidelines on the month-end trading day n U.K holiday, profit-taking emerged in U.S. session n price rebounded to as high as 1.4368 after the better-than-expected Chicago PMI data (came out at 50.0, versus forecast of 47.8).
Sterling was pressured in tandem with euro due to cross selling versus yen n hit an intra-day low at 1.6184 in European morning. However, price rebounded in U.S. session due to good U.S. data. On crosses, sterling fell to as low as 150.08 yen b4 recovery, while EURJPY also pared some losses in U.S. afternoon after early fall to as low as 132.16 in Asian session.
On commodity currencies, Canada’s dollar fell to 1.1094 per U.S. dollar as crude oil, the nation’s main export, dropped 3.5 percent to $69.27 a barrel in New York morning on weak data (Q2 GDP shrank at a 3.4 percent y/y, worse than forecast -3.0%). However, the Lonnie rebounded in afternoon as the oil price also recovered to $69.67. The kiwi fell for a second day to as low as 0.6793 versus U.S. dollar as RBNZ Governor Alan Bollard said in an interview that the currency’s strength is hampering an export-led recovery.
Earlier in the day, the Shanghai Composite Index tumbled 6.7% to 2667 on concern a slower lending growth may derail a rebound in the world’s third-largest economy. The drastic fall in SCI dragged Asia equity markets down n led to risk aversion that pressured European stocks n the Dow Jones as well. DJI fell 47.92 n ended at 9496, while NASDAQ n S&P 500 fell to 2009 n 1020 respectively.
Economic data to be released on Tuesday include:
current account n RBA rate decision in Australia; Q2 GDP in Switzerland; retail sales n unemployment data in Germany; manufacturing PMI in Eurozone; Halifax house price n manufacturing PMI in U.K; construction spending n ISM manufacturing data plus pending home sales in U.S.