Yen re­bounds vs dol­lar as fal­ter­ing stocks re­vive safety bids

The Pak Banker - - MARKETS/SPORTS -

The yen rose sharply against the dol­lar on Mon­day, a G20 meet­ing in Shang­hai seen as hav­ing done lit­tle to set­tle nerves over the pace of global growth af­ter a rocky start to 2016. Chi­nese pur­chas­ing man­ager sur­veys due on Tues­day also pro­vided the mar­ket with some­thing to be ner­vous about and both Chi­nese stocks and the yuan cur­rency were lower as Euro­pean mar­kets came on line.

Have now al­lowed the yuan to weaken al­most 1 per­cent against the dol­lar CNY= CNH= from highs hit when mar­kets re­turned from the Lu­nar New Year hol­i­day two weeks ago. Sug­ges­tions that Switzer­land could lower the rate at which big in­sti­tu­tional de­pos­i­tors pay for hold­ing Swiss francs also saw the franc weaken against the euro.

Ster­ling, bat­tered by "Brexit" ref­er­en­dum con­cerns last week, was trad­ing back below $1.39 af­ter some overnight gains. GBP=

The yen, tra­di­tion­ally in­vestors' safe haven of choice in times of global eco­nomic ten­sion, gained just un­der 1 per­cent to 113.05 yen per dol­lar JPY=EBS and 123.47 yen per euro EURJPY=EBS re­spec­tively.

"There's a risk off tone across the mar­kets this morn­ing," said To­bias Davis, head of cor­po­rate cur­rency sales at Western Union in Lon­don.

"The G20 has been seen as un­der­whelm­ing, cou­pled with head­line con­cerns around Brexit and Chi­nese eq­ui­ties slump­ing to 15 month lows." The com­mu­nique from Group of 20 fi­nance min­is­ters and cen­tral bankers meet­ing agreed to use "all pol­icy tools - mon­e­tary, fis­cal and struc­tural - in­di­vid­u­ally and col­lec­tively" to im­prove growth but was un­der­cut by signs some gov­ern­ments have no room or in­ten­tion of spend­ing more go­ing for­ward.

U.S. data on Fri­day had been more bullish. In­di­ca­tors showed a solid rise in U.S. con­sumer spend­ing and the per­sonal con­sump­tion ex­pen­di­tures (PCE) price in­dex. Fourth quar­ter U.S. GDP growth was also re­vised up to 1 per­cent.

But the per­ceived risks from China to global growth has been a big fac­tor in in­vestors re­treat from ex­pec­ta­tions of fur­ther U.S. in­ter­est rate rises since the turn of the year.

Fur­ther falls in the yuan would fur­ther cheapen the cost of the man­u­fac­tured goods it pumps into the world econ­omy, fur­ther low­er­ing the out­look for in­fla­tion.

Net long con­tracts on the yen rose to 52,734 in the week ended Feb 23 from 47,901 the week be­fore, Com­mod­ity Fu­tures Trad­ing Com­mis­sion data showed. That was the largest net long po­si­tion since Fe­bru­ary 2012.

"Re­viv­ing ex­pec­ta­tions for a rate hike by the Fed is a key fac­tor to halt the dol­lar's re­cent de­pre­ci­a­tion," said Koji Fukaya, pres­i­dent of FPG Se­cu­ri­ties in Tokyo.

The dol­lar in­dex dipped to 98.03 .DXY and the euro stood nearly un­changed at $1.0927 EUR= af­ter re­treat­ing 0.8 per­cent on Fri­day. A move below $1.0912 would take the com­mon cur­rency to a one-month trough.

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