Yen rebounds vs dollar as faltering stocks revive safety bids
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.