Yen Rallies Most in 1 Week as China Slump Bolsters Refuge Demand

Updated on
  • Japan's currency leads gains versus dollar among G-10 peers
  • 48% of 54 economists surveyed predict Fed rate rise Sept. 17

The yen surged the most in more than a week as Chinese stocks extended their slump, boosting demand for haven assets.

Japan’s currency rose with the euro and Swiss franc as Asian and European shares weakened for a second day, after a gauge of manufacturing in China fell to a three-year low. The dollar dropped as slowing global growth clouded the outlook for the Federal Reserve’s first interest-rate increase since 2006.

“The risk-off baton continues to get handed from one part of the world to the other,” said Joe Manimbo, an analyst at Western Union Business Solutions, a unit of Western Union Co., in Washington. “It’s a classic safe-haven play into the yen and Swissie.”

The yen strengthened 1.5 percent to 119.37 per dollar as of 5 p.m. New York time, its biggest increase since Aug. 24. The euro rose 0.9 percent to $1.1315, and the franc appreciated 0.9 percent to 95.88 centimes versus the greenback.

August Performance

The euro and yen both gained more than 2 percent at the expense of the U.S. dollar last month. Bloomberg’s gauge of the greenback fell 0.1 percent in August and slipped 0.2 percent Tuesday.

More than $6 trillion has been wiped from global equities since China’s shock yuan devaluation on Aug. 11. Stocks extended losses on Tuesday, with the China’s Shanghai Composite Index of stocks dropping as much as 4.8 percent. The MSCI Asia Pacific Index slid 2.3 percent while the Stoxx Europe 600 Index declined 2.7 percent and the S&P 500 lost 3 percent.

“Any bad news from China is highlighting concerns on whether a China slowdown is going to translate into a slowdown in global markets,” Sireen Harajli, a strategist at Mizuho Bank Ltd. in New York, said by phone. “We’re seeing yen, we’re seeing the Swiss franc, gain on this move. It’s more of a safe-haven play.”

The yen strengthened beyond its 50-, 100- and 200-day moving averages, according to data compiled by Bloomberg.

Traders and analysts have pushed out bets on when the Fed will raise borrowing costs, with 48 percent of 54 economists surveyed by Bloomberg at the end of last month predicting a Fed rate increase on Sept. 17, down from 77 percent about three weeks earlier.