Yen Weakens Broadly On Upbeat Manufacturing Data

The Japanese yen dropped against other currencies on Monday on improved risk appetite as the manufacturing data from Europe, Japan and U.S. prompted investors to buy risky assets.

Versus the Japanese yen, although the greenback rose initially to 99.54 ahead of Tokyo open after the release of better-than-expected Japan's tankan survey (Tankan big manufacturers' sentiment index came in at +4, the first positive figure since September 2011), the pair retreated briefly to 99.18 but then gained to 99.72 in European morning due to active cross selling of yen versus other currencies. Price extended recent upmove to a fresh 3-week top at 99.87 in New York morning after the release of better-than-expected U.S. ISM manufacturing PMI (50.9 versus the forecast of 50.5) before retreating in U.S. afternoon.

The single currency ratcheted higher from Australian low at 1.3007 in Asia and rose strongly in European morning due to the upbeat Italy and French Manufacturing PMI, which came in at 49.1, the highest since July 2011, and 48.4 (16-month high) respectively. Price reached 1.3060 after the release of better-than-expected EU unemployment rate (12.1% versus 12.3%) before retreating to 1.3014 in New York morning on dollar's broad-based strength due to the solid U.S. ISM manufacturing PMI. However, cross buying of euro versus sterling pushed the pair to 1.3067 before trading narrowly in U.S. afternoon.

The British pound edged higher in Asia and rose to 1.5229 before retreating to 1.5183 in European morning in part due to cross selling in sterling. However, the release of better-than-expected U.K. Jun manufacturing PMI (52.5 versus 51.5) and mortgage approvals in May (58.2K versus 54.8K) lifted price above 1.5229 to 1.5248. Later, the pound rose marginally above 1.5248 to 1.5249 in New York morning due to the strong rebound in EUR/USD but then retreated in U.S. afternoon on cross selling of sterling versus euro.

On the data front, EU CPI in June came in at 1.6%, same as expectation. EU core CPI in June was released at 1.2%, same as the forecast. U.S. construction spending in May came in at 0.5%, worse than the expectation of 0.6%, previous reading is revised to 0.1%

Data to be released on Tuesday:

Australia rate decision, U.K. PMI construction, EU PPI, U.S. Redbook retail sales, durable goods (rev.), factory orders.