Recovery in Chinese Manufacturing leads Japanese Yen to a Six-Month Low
Japanese yen has hit a six-month low, mainly because investors cheered an unexpected rebound in the Chinese manufacturing industry as the upcoming British election race affects the pound.
Having reached its lowest since May, the Japanese yen plunged 0.2 percent to 109.72 per dollar. Post two surveys, it was revealed that the riskier currencies rallied and Chinese factory activities have expanded.
Multiple polls pointed to a sharply narrowing lead for the UK’s Conservative Party prior to the general elections. Consequently, the sterling GBP=D3 was down a quarter of a percentage point at $1.2913.
The gains were directed by the kiwi, that put on 0.6 percent against the Japanese yen to reach its highest since August NZDJPY= and surged 0.3 percent on the greenback NZD=D3 to purchase $0.6444, its strongest in a month.
As per the Senior Market Strategist at BNZ, Wellington, Jason Wong, “S&P futures are up, there’s a risk-on mood.” Following upbeat official data over the weekend, a private business survey – Caixin survey, showed on December 1, that the factory activity of China has expanded at the quickest pace in almost three years in November.
The Caixin survey showed the total new orders and factory production at an optimistic state. Also, a report from Axios, citing a source closely associated with the US negotiating team, said that tensions in Hong Kong that had impeded the US-China trade talks weren’t enough to dent the sentiment.
A senior strategist at National Australia Bank in Sydney, Rodrigo Catril said, “The market is taking it with a degree of salt, waiting for clarity.” He added, “We keep on getting these unofficial statements. No-one is going to be taking major positions until we get more clarity on the trade front.”
As a response to the decision of US President Donald Trump to back the anti-government protestors in Hong Kong, the Chinese government announced last week that it would consider taking “firm countermeasures”. The details of these have not been leaked as of now.
Speaking of the Australian dollar, the trade-sensitive currency has already headed for its biggest percentage gain in two weeks, added 0.2 percent to $0.6774. The greenback held steady against the euro EUR= at $1.1017 and against a basket of currencies. DXY at 98.319.
The scope of further monetary easing in China and the lack of firm news on trade, kept the yuan on an even to 7.0301 dollar. Speaking of the matter, senior market analyst at Gain capital, Singapore said, “These things tend to move in unison”. He added, “So if we got a positive readout from China, it’s quite likely we’ll get positive reads from Europe later today, in which case you’re looking at long euro. You’d only have to come a tick or two higher above expectations and you’ve got upside, arguably, for the euro.”
The Nikkei Stock Average inclined 251.01 points, or 1.08 percent to 23,544.92. The broader Topix index of all First Section issues on the Tokyo Stock Exchange added 17.22 points or 1 percent at 1,716.58.
As the US-China trade talks continue to indicate confusion, the Japanese yen is probable to witness further changes.
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