US dollar dumped because of mainland economy jitters
Russian ruble collapses; down to 7-month low on weak oil prices
Currency traders dumped the U.S. dollar Monday on the back of a global equities rout, as fears about mainland China and the global economy hammered sentiment and sent investors fleeing into safer investments.
The greenback dropped to 121.19 yen from 122.06 in New York on Friday and sharply down from above 124 yen on Thursday in Asia.
The euro rose to US$1.1451 from US$1.1386, while it weakened to 138.77 yen from 138.97 yen in U.S. trade.
Jitters over China and the global economy saw traders move into the yen — a safe haven in times of turmoil and uncertainty — as stocks markets around the world plunge.
On Monday, Shanghai shares tumbled more than 8 percent in the morning, while Tokyo’s benchmark stock index dropped 3.21 percent by the break.
Investor fears have spiked on concerns the world’s secondbiggest economy is slowing more than previously thought after mainland China’s central bank devalued the yuan in a shock move seen as a bid to boost sagging exports.
On Friday, mainland China reported weak manufacturing data, fueling concerns among investors over the clouding outlook for the world economy.
“China fixes, Shanghai and U.S. stock market performances and the actions — or lack thereof — of Chinese policymakers, promise to keep markets rapt,” National Australia Bank in a commentary.
The U.S. dollar was also hit as hopes dive for an imminent U.S. interest rate hike.
“The yen and euro are benefiting from both emerging-market risk aversion caused by China’s surprise move this month on the yuan and from falling expectations that the Fed will hike interest rates,” Mansoor Mohi-uddin, senior markets strategist in Asia at Royal Bank of Scotland, told Bloomberg News.
Minutes from the U.S. Federal Reserve’s July meeting last week revealed policymakers want to see further improvement in the labor market and inflation before raising interest rates for the first time in nearly nine years.
Investors eye revised U.S. economic growth data which will be released this week as a fresh sign for the timing for an interest rate hike.
The Russian ruble plunged 2.3 percent on Monday to hit a seven- month low amid a further drop in oil prices, the country’s key export.
The ruble traded at 70.7 to the U.S. dollar in early trading in Moscow, its lowest level since Jan. 30, when Russian markets were hit by a combination of low energy prices and Western sanctions.
Oil is the backbone of the Russian economy and the fall of the ruble follows a sharp decline in the price of crude. The U.S. oil contract on Friday dropped below US$40 per barrel for the first time since 2009 and on Monday was down another US$1.23 a barrel at US$39.22.
Russian officials have insisted that the economy is strong enough to weather the decline.