Soft US data hits dollar but markets rally
FADING expectations of a US interest rate rise this year hit the dollar and boosted stocks in Asia yesterday, although Shanghai equities took a hammering from weak Chinese manufacturing data.
The July 29 report showing the world's number one economy expanded just 1.2 percent year-on-year in April-June poured cold water on speculation the Federal Reserve will raise interest rates before year-end.
It also came hours after the Bank of Japan disappointed investors by deciding against ramping up its stimulus program.
The two events stung the greenback, which ended July 29 just above the 102 yen mark, well down from levels around 106 yen touched the day before.
In Asian trade, the dollar edged up slightly against the Japanese currency to 102.47. But it lost ground against the South Korean won, Indonesian rupiah and Malaysian ringgit, which jumped 0.8pc.
Forex traders are expecting Japanese Prime Minister Shinzo Abe to outline details of the government's 28 trillion yen stimulus today.
The likelihood of US interest rates remaining low supported Asia's equity markets, however.
Japan's Nikkei ended up 0.4pc, having recovered from early losses fuelled by the strong yen, while Taipei, Manila and Singapore posted healthy gains. Hong Kong rallied 1.1pc, Sydney ended 0.5pc higher and Seoul jumped 0.7pc.
But Shanghai ended down 0.9pc after official figures showed China's purchasing managers' index of manufacturing activity indicated the sector shrank last month – the first time since February.
The data is the latest bad news on the world's number two economy, which is growing at its slowest rates in a quarter of a century. –