Dollar Lower as Asia Stocks Slump

31 Aug 2015 | Author: | No comments yet »

Euro Ties to Yen Tightest Since 2007 as Havens From Fed, China.

Asian stocks fell Monday after a US Federal Reserve official suggested a September interest rate hike still was possible and Japanese factory activity weakened (at 11:15 a.m. As China’s economic slowdown and a possible Federal Reserve interest-rate increase roils global markets, currency traders are treating the yen and the euro as havens of choice. The Japanese and European currencies both advanced Monday for the first time in a week as uncertainty increased about global monetary policy direction. Stability should return as China worries recede and expectations heighten for the U.S. economy.” The yen gained 0.5 percent to 121.12 per dollar as of 2:45 p.m. in Tokyo.

It has strengthened 2.3 percent this month, heading for its biggest advance since January 2014, after China unexpectedly devalued the yuan on Aug. 11. The single currency has climbed 2.4 percent in August, set for the best month since April. “Yen demand is coming from traders wanting to buy some protection from volatility here,” said Robert Rennie, the global head of currency and commodity strategy at Westpac Banking Corp. in Sydney. “It’s a massive week across all markets.” Manufacturing data and employment figures are due from the U.S. this week Economists forecast that a report on Friday will show employers hired 220,000 workers in August, compared with an average of 211,000 so far this year.

Speaking at the U.S. central bank’s annual gathering in Jackson Hole, Wyoming, Fisher emphasized he was not saying what action the Fed might take at its September meeting but analysts took his comments to mean he saw the economy moving close to satisfying the Fed’s conditions for a hike. Fed Vice Chairman Stanley Fischer on Aug. 29 indicated policy makers are open to increasing borrowing costs next month. “What we’re looking out for this week is the dollar strengthening back again given that Fischer has failed to rule out a September rate hike,” said Raiko Shareef, a markets strategist in Wellington at Bank of New Zealand Ltd. JAPAN WEAKNESS: Industrial production declined unexpectedly by 0.6 percent in July from the previous month, defying forecasts of a small increase following June’s 1.1 percent rise. “The drop in industrial production in July suggests that economic activity will recover only slowly this quarter,” said analyst Marcel Thieliant of Capital Economics in a report. 5.

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