Weak China Data helps Yen versus U.S. Dollar and Euro

By: Barbara Zigah

A decline in regional equity markets coupled with softer than forecast economic data from China raised investor uncertainty over recovering health of the global economies and helped to broadly push up the safe-haven Yen in Asia today. Economists’ had earlier predicted that China’s GDP would increase by 10.5%; the report, however, showed that GDP slowed to 10.3% in the 2^nd quarter, well off the 11.9% growth of the 1^st quarter of 2010. This prompted many Asian investors to buy heavily into the safe-haven Yen.  One currency manager in Japan suggests that speculators bought the Japanese currency strictly as a refuge until they can more closely examine the potential effect the Chinese slowdown may have on the worldwide economic recovery.

As reported at 2:23 p.m. (JST) in Tokyo, versus the Yen, the U.S. Dollar slipped to an intra-day trough of 88.01 Yen on the EBS trading platform; off from yesterday’s New York trade of 88.19 Yen. Meanwhile, the Euro also slipped against the Japanese currency, trading at 112.06 Yen, off from yesterday’s New York trade of 112.29 Yen. A currency strategist in Tokyo noted that demand for the Yen will rise if the global equity markets continue to decline and as long as U.S. bond yields remain weak; he foresees that the U.S. Dollar will likely trade from 87.00 Yen to 90.00 Yen over the course of the next two weeks.