May 5, 2014 / 8:37 AM / 4 years ago

FOREX-Yen hits 2-week high against dollar on soft China PMI

* Dollar/yen touches 2-week low, Aussie also sags
    * Dollar cautious after choppy session on Friday

 (Updates prices, adds comments)
    By Anirban Nag
    LONDON, May 5 (Reuters) - The yen rose to a two-week high
against the dollar on Monday after a survey showing China's
manufacturing activity contracted for a fourth straight month
bolstered the safe-haven Japanese currency.
    Strong headline U.S. payrolls numbers on Friday initially
boosted the dollar against the yen, but it then erased those
gains as investors focussed on less promising labour force and
wages data as well as the crisis in Ukraine.
    The dollar lost further ground after a private survey showed
China's manufacturing activity remained weak in April, adding to
signs that the world's second-largest economy is losing
    The data also dragged the growth-linked Australian dollar
down against the yen. China is Australia's biggest export
    The greenback fell as low as 101.86 yen, its weakest
level since April 17 and down more than 1 yen from Friday's near
one-month high of 103.025 yen on trading platform EBS. It was
last trading at 102, still down on the day, with volumes very
low on the Reuters Matching system.
    Volumes are likely to be thin this week, with Japanese
markets closed on Monday and Tuesday for public holidays. Banks
in London, the biggest market, were also shut on Monday.
    "There is risk aversion that is keeping the yen supported,"
said Niels Christensen, FX strategist at Nordea, Copenhagen.
    "Also, the dollar has been weighed down by the U.S. data
which shows wages are not growing fast enough to trigger worries
about inflation. As a result, tightening by the Fed is some way
off, and that is not helping U.S. yields."
    Even though U.S. employers hired workers at the fastest rate
in more than two years in April, there was a large increase in
the number of people dropping out of the labour force, and weak
wage growth.
    Further undermining the dollar was a drop in U.S. Treasury
yields, particularly at the long end. The benchmark ten-year
yield plumbed a three-month low of 2.57 percent and
was last at 2.59 percent.
    The dollar will probably stay on the defensive against the
yen in the near term, especially since market positioning is
still probably tilted toward favourable dollar bets, said
Satoshi Okagawa, senior global markets analyst for Sumitomo
Mitsui Banking Corporation in Singapore.
    "In the short term, it (the dollar) will probably stay
heavy," Okagawa said.
    The yen rose broadly, with the euro shedding 0.2 percent to
141.55 yen, and the Australian dollar 0.2 percent to
94.64 yen.
    The euro was steady at $1.38715, holding above
Friday's intraday low of $1.3812.
    It rose to 9.0572 crowns after data showed
Swedish industrial production fell 3.8 percent in March, adding
to fears about a sharp slowdown and possible deflation.

 (Additional reporting by Masayuki Kitano in SINGAPORE; Editing
by John Stonestreet)
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