Yen rallies after weak Chinese data and plunge in the Nikkei boost risk aversion
The Japanese yen rallied after reaching a fresh 4-1/2 year low yesterday after weaker-than-expected Chinese data and selloff in Japanese stocks boosted risk aversion. The yen was also supported due to the jump in 10-year Japanese government bond yields, which rose to 1%, the highest in a year.
China HSBC flash manufacturing PMI dropped to 49.6 in May from 50.4 previously.
Despite a brief rebound to session high at 103.57 in early Asian morning, price began intra-day decline after data showed Chinese manufacturing activity contracted for the first time in 7 months. A selloff in Asian equities (Japan’s Nikkei 225 stock gauge tumbled by 7.3%) increased safe haven demand and price continued to ratchet lower, eventually falling to a low at 100.83. However, the greenback pared intra-day losses and rebounded in New York, helped by the release of better-than-expected U.S. jobless claims, pricre later edged higher to 102.06 near New York close.
U.S. weekly initial jobless claims came in at 340K, better than the expectation of 345K. The prior reading was revised to 363K.
Although the single currency rebounded to 1.2856 in Asian morning, price met renewed selling there and retreated to session low at 1.2821 at European open. However, euro pared intra-day losses and rose to 1.2904 in European morning, helped by the release of better-than-expected Germany and EU manufacturing PMI. Despite a brief pullback to 1.2876, price resumed intra-day ascent and climbed to a high at 1.2957 in New York morning before stabilising.
German manufacturing PMI in May came in at 49.0, better than expectation of 48.5. Euro zone manufacturing PMI in May came in at 47.8, stronger than the forecast of 47.0.
The British pound also rebounded in Asian morning to 1.5053 before briefly retreating to 1.5022 at European open. Cable found renewed buying there and rose to 1.5094 in European morning after government report confirmed the U.K. economy returned to growth in the first quarter. Despite a brief pullback to 1.5054 in New York morning, price climbed to an intra-day high at 1.5129 in New York morning.
U.K GDP 2nd release in Q1 is reported 0.3% Q/Q n 0.6% y/y, same as expectation.
In other news, Japan EconMin Akira Amari said 'Japan's economy is on its way to recovery, no need to be upset about sharp fall in stocks; closely watching market movements; natural for yen to gain in reaction to sharp falls in stocks' ECB's Nowothy said 'euro zone growth in 2013 could be worse than EU originally forecast; not time yet to unwind massive intervention by central banks to support economies.'
Data to be released on Friday:
New Zealand import, export, trade balance, Germany GDP, export, import, Gfk consumer confidence, Ifo business climate, current assessment, France business climate, Italy consumer confidence, UK mortgage approvals, U.S. durable goods, ex. transport and ex. defense.