Tuesday, 30 July 2013 00:13
Reuters: The yen rose to a one-month high against the dollar on Monday as investors braced for another round of disappointing economic news out of China, knocking Japanese stocks to four-week lows and pulling down regional markets.
Investors gave the dollar a wide berth as they also suspect the U.S. central bank will press home the message that it will keep policy loose for some time after its review on Wednesday.
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.4%, giving back some of last week’s 1.9% gain. Tokyo’s Nikkei slid more than 2% to its lowest since July 1.
Traders said there were concerns that manufacturing surveys from China later this week would point to more weakness in Asia’s economic powerhouse.
“A sense of caution is looming in the market, especially because investors are worried about a slowdown in the Chinese economy. And when they see a risk in Asia, they tend to buy the yen, and the Japanese market is hit by that,” said Kyoya Okazawa, head of global equities at BNP Paribas.
Indeed, the yen rose to a one-month high around 97.64 per dollar, while the euro fell back below 130.00 yen to two-week lows.
Against the dollar, the euro edged up 0.1% to $1.3290. The dollar index, which tracks the greenback’s performance against a currency basket, slipped more than 0.2% to a five-week trough.
The Federal Reserve, the European Central Bank and Bank of England are all expected to maintain their respective pledges to keep policy loose at meetings this week, a commitment that should provide a backstop for any market disappointment with data or earnings reports that are due out from major companies.
“The Fed is likely to reiterate that while it is considering tapering its monetary stimulus later this year, it is conditional on stronger economic growth and that interest rate hikes are still a long way off,” said Shane Oliver, head of investment strategy at AMP Capital.
Oliver said the Fed might even consider adjusting its policy guidance to emphasise there will be no imminent tightening.
“The Fed’s assessment of recent mixed data will clearly be watched as a guide to whether the start of tapering will be delayed beyond the September meeting, which was initially the consensus favourite as to when it would begin.”
Worries about China kept commodities under pressure, although the weaker dollar helped limit their losses.
Copper reached three-week lows around $6,820 a tonne, while U.S. crude eased 0.3% to $104.40 a barrel, staying within reach of a three-week trough of $103.90 hit on Friday.
Gold was also a touch softer following a 3% rally last week. It stood around $1,328 an ounce, just off a five-week peak of $1,347.69.