* China, EM worries spark selloff in risk assets
* Euro helped by strong business data, rising c/a surplus
* Swiss franc benefits from country's move to dampen housing
* As EM currencies savaged, Aussie & loonie also hit hard
* Dollar not helped by fall in U.S. bond yields
By Ian Chua and Hideyuki Sano
SYDNEY/TOKYO, Jan 24 The yen and Swiss franc
held firm on Friday, having charged higher overnight as worries
about a slowdown in China and turmoil in some emerging markets
spurred demand for the safe-haven currencies.
The euro also held onto the previous day's hefty
gains, which stemmed from data that showed a strong euro zone
recovery and fuelled a shift of funds into the common currency
from emerging markets.
Among the wild moves in emerging markets, the Argentinian
peso suffered its sharpest fall since 2002 as the
country's central bank gave up on defending the currency.
Even the normally stable Hong Kong dollar seemed to
be coming under pressure as well.
The concern about China was rooted in a weak January factory
"China is, in a way, the kingpin of emerging markets. When
the Chinese economy suffers, so do a lot of emerging
currencies," said Sho Aoyama, senior market analyst at Mizuho
Securities in Tokyo.
"The other side of the coin is, when investors avoid risk,
they buy currencies backed by a current account surplus", he
added. Data published on Thursday showed the euro zone current
account surplus hit a record high in November.
The dollar fell more than 1 percent against the yen and
Swiss franc on Thursday, reaching a two-week low of 102.97 yen
and a three-week low of 0.8964 francs.
The dollar last stood at 103.40 yen, up slightly from late
U.S. levels thanks to bargain-hunting from Japanese importers.
Against the Swiss currency, it fetched 0.8988 franc.
The Swiss franc had additional support from the Swiss
government's decision to raise banks' capital requirements for
mortgage book to dampen Switzerland's housing market boom.
The measure, seen as a balancing act to curb asset bubbles
while maintaining its peg of the franc to the euro, suggested
Switzerland could come under more pressure to tighten its
monetary policy in the future.
The euro held at $1.3683, having jumped 1.1 percent and
rising as far as $1.3699 at one point on Thursday, a near
Helping the euro was the Markit's gauge business activity,
which jumped to 53.2 in January from 52.1 last month, beating
all forecasts in a Reuters poll of 25 economists and marking its
highest reading since mid-2011.
In contrast, the dollar nursed heavy losses after suffering
its biggest one-day fall in four months against a basket of
major currencies, undermined by a drop in U.S. benchmark yields
to a six-week low.
The dollar index was last at 80.518, having skidded
nearly 1 percent on Thursday.
Risk sentiment soured after a survey released on Thursday
showed China's vast manufacturing sector kicked off 2014 on a
A number of emerging economy currencies came under pressure,
with the Turkish lira hitting a record low against
the dollar, the South African rand slumping to a 5-1/2
year trough and the Russian rouble falling to its weakest
in nearly five years.
Currencies from Brazil, Venezuela and Mexico all took a
beating as well.
This is partly because many still suspect the Federal
Reserve will continue to unwind its massive bond-buying stimulus
at next week's policy meeting.
That move is seen as having potential to hurt many markets
that had long benefited from floods of cash the Fed's huge money
printing programme has created.
"We would be cautious of fading this risk aversion move
given the scale of some of the losses in commodity and emerging
market currencies, and the euro may stay better supported in the
near-term as euro-funded risk positions are covered," analysts
at BNP Paribas wrote in a note to clients.
The Argentine central bank's decision not to defend that
currency raised eyebrows.
"The currency has been falling for most of the last couple
of years anyway so few people would have cared. But it was a
symbolic move," said Takako Masai, a manager of forex at Shinsei
Bank in Tokyo.
"We will have to see whether this risk-off trade will
subside today. If it does, then I wouldn't be too worried about
it spiralling into more sinister moves," she said.
Dollar-bloc commodity currencies were also hit hard with the
Australian dollar floating near a 3-1/2 year trough of $0.8732
hit on Thursday, while the Canadian dollar slid to a
4-1/2 year low of C$1.1174 per dollar on Thursday
before stabilising around C$1.1106.
The New Zealand dollar outperformed its Aussie and Canadian
peers, slipping just a touch to $0.8282. Investors were
unwilling to sell the kiwi amid speculation the Reserve Bank of
New Zealand could hike interest rates as early as next week.
Sterling was another standout performer, continuing its
winning ways to reach a near three-year high of $1.6644
It is supported by growing expectations that robust economic
data, including a sharp fall in jobless rate, will lead the Bank
of England to raise interest rates sooner than previously
The pound's gain came even as Bank of England Governor Mark
Carney said on Thursday that there is no need for an immediate
rate hike and that the bank is not looking at employment alone
to assess the economy.