Yen Rises Second Day as China Manufacturing Slows; Euro Weakens
The yen strengthened for a second day versus the euro and the dollar after an industry report showed Chinese manufacturing expanded at a slower pace, increasing demand for safer assets.
Japan’s currency advanced at least 0.6 percent against all 16 of its major counterparts before euro-area data that economists said will show industrial output in the region slowed for a 21st month. The euro fell as an index of German manufacturing declined more than economists forecast. The New Zealand and Australian dollars declined due to the signs of slowdown in China, their largest trading partner
“The market has been very much positioned for risk-on trade so the yen has become the funding vehicle of choice for those trades,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. (WBC) in Singapore. “If we’re entering into an environment where we’re a bit more uncertain about the growth outlook for China, therefore Asia more broadly, now is maybe not the time to be piling into those types of trades.”
The yen rose 1.2 percent to 128.05 per euro at 8:47 a.m. London time after appreciating 0.2 percent yesterday. Japan’s currency gained 0.6 percent to 98.59 per dollar after falling to 99.95 on April 11, the weakest since April 2009. The euro declined 0.6 percent to $1.2994.
HSBC Holdings Plc and Markit Economics said their China’s Purchasing Managers’ Index had a preliminary reading of 50.5 in April, compared with a final 51.6 for March. A level above 50 indicates expansion.
China’s stocks declined as the report added to an unexpected slowdown in economic growth, reported last week, that prompted banks including Goldman Sachs Group Inc. to cut full- year forecasts.
A PMI for manufacturing industries in the euro area dropped to 46.7 in April from 46.8 the previous month, London-based Markit Economics will say today, according to a Bloomberg News survey. German manufacturing PMI dropped to 47.9 from 49, Markit said. Economists had predicted it would be unchanged.
The Australian and New Zealand dollars declined as the slowdown in China signaled a worsening outlook for the two nations’ exports.
“We’re not seeing a sustained period of recovery in the China data, which is a bit of a concern,” said David Forrester, a senior vice president for Group of 10 foreign-exchange strategy at Macquarie Bank Ltd. in Singapore. “It’s a reflection of weaker global growth, and it’s not good news for the Aussie or the kiwi.”
Australia’s currency weakened 0.5 percent to $1.0226 after sliding to $1.0221, the lowest since March 11. New Zealand’s dollar fell 0.7 percent to 83.63 U.S. cents.