Asian session – Yen strengthens after Fed taper, soft China PMI dampens risk appetite
January 30, 2014 7:49 am
The Federal Reserve announced as expected its decision to continue winding down its stimulus program. Fed policy makers unanimously voted to cut the US central bank’s bond buying program by another $10 billion-a-month, to $65 billion.
While the news of a reduction in QE would normally be positive for the dollar (since QE tends to have a weakening effect on a currency), the dollar did not strengthen much after the Fed announcement, partly because the markets had already priced in such a move by the Fed.
Meanwhile, risk aversion that was triggered by the emerging market turmoil in recent days still lingered in the markets, thereby keeping the dollar subdued as investors rushed to the safety of bonds and the safe haven yen.
Further dampening risk appetite was some soft data from China today. The HSBC manufacturing PMI index fell to a 6-month low in January, down to 49.5, from the previous flash estimate of 49.6. December’s number was at 50.5. Anything above 50 signifies expansion, while below 50 shows contraction. China is the world’s second largest economy, so the data is important to markets.
The dollar tumbled after the Fed announcement to reach a low of 101.83 yen but recovered slightly in the Asian session to gain 0.12% to 102.40.
The euro also trimmed losses against the yen, ending with a 0.06% gain in Asia to 139.82, off the post-Fed low of 139.02, its lowest level since early December.
Against the dollar, the euro eased 0.06% to 1.3654, but stayed above Wednesday’s 1-week low of 1.3602.
The Aussie fell 0.13% against the greenback, to end the session at 0.8728.
The data releases during the upcoming European session will be predominantly from Germany. CPI and employment change data are due to be published. Meanwhile, in the US session, the fourth quarter GDP numbers will be released. This will be a key risk event for the dollar.
The Federal Reserve announced as expected its decision to continue winding down its stimulus program. Fed policy makers unanimously voted to cut the US central bank’s bond buying program by another $10 billion-a-month, to $65 billion.
While the news of a reduction in QE would normally be positive for the dollar (since QE tends to have a weakening effect on a currency), the dollar did not strengthen much after the Fed announcement, partly because the markets had already priced in such a move by the Fed.
Meanwhile, risk aversion that was triggered by the emerging market turmoil in recent days still lingered in the markets, thereby keeping the dollar subdued as investors rushed to the safety of bonds and the safe haven yen.
Further dampening risk appetite was some soft data from China today. The HSBC manufacturing PMI index fell to a 6-month low in January, down to 49.5, from the previous flash estimate of 49.6. December’s number was at 50.5. Anything above 50 signifies expansion, while below 50 shows contraction. China is the world’s second largest economy, so the data is important to markets.
The dollar tumbled after the Fed announcement to reach a low of 101.83 yen but recovered slightly in the Asian session to gain 0.12% to 102.40.
The euro also trimmed losses against the yen, ending with a 0.06% gain in Asia to 139.82, off the post-Fed low of 139.02, its lowest level since early December.
Against the dollar, the euro eased 0.06% to 1.3654, but stayed above Wednesday’s 1-week low of 1.3602.
The Aussie fell 0.13% against the greenback, to end the session at 0.8728.
The data releases during the upcoming European session will be predominantly from Germany. CPI and employment change data are due to be published. Meanwhile, in the US session, the fourth quarter GDP numbers will be released. This will be a key risk event for the dollar.
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