The U.S. dollar retreated from 2 ½ month highs after weak Chinese trade data confirmed that the country’s U.S. imports were back in contractionary territory and that the country’s exports fell 10 percent in September as compared to last year’s export data. As concern mounted about China, the world’s second-largest economy, the dollar dropped to as low as 103.555 yen on Thursday, down a full 1 percent from the day’s high of 104.635.
The pound returned to its recent downtrend on Thursday, falling 0.2 percent to $1.2183, after rising 0.7 percent on Wednesday. The euro also fell 0.2 percent on Thursday, to $1.1024, a slight rise off nearly 3 month lows that were hit earlier in the session.
Analysts have begun to speculate whether the weak Chinese data may lead to a weaker currency policy in the country in the near future, which may impact the deflation in the rest of the region. If this theory proves to be the case, traders expect more movement for the yen and other safe-haven assets in the coming weeks.
Meanwhile, in Japan, Reuters has quoted sources saying that the Bank of Japan is likely to cut next year’s fiscal inflation forecast in its quarterly review, though they don’t expect easing by the central bank in the near future, as the policy framework was revamped only one month ago. Though there will be a two-day rate review in Japan next month, BOJ Governor Haruhiko Kuroda has said that he doesn’t expect stimulus measures to be implemented unless the yen spikes suddenly in a way that could undermine the currency’s recovery.
Yukata Harada, a BOJ member told reporters on Wednesday that consumer inflation wasn’t accelerating as quickly as expected, so he expects the BOJ will reduce its price forecasts during its quarterly report on November 1.