China PMI Data Lifts Yen

The Japanese Yen gained broadly during the Asian trading session after a disappointment from China’s manufacturing sector gave investors yet another reason to consider a downturn in global economic health. HSBC reported that the April PMI reading fell to 50.5 against expectations of only a slight deterioration to 51.4 from 51.6; 50.0 is the threshold which separates an expansionary period from a contractionary one.

The news that China’s manufacturing sector continues to struggle for traction in the second quarter had its largest impact on the growth linked currency the Australian Dollar which slipped more than 0.4% against the U.S. Dollar to trade at $1.0222; the Aussie lost considerably more, nearly 1%, against the Japanese Yen to trade at 100.85 Yen.

Investors had been hopeful that expectations of further easing by the Japanese central bank would push the currency broadly lower but analysts say that the rise in risk aversion has temporarily put a halt to those expectations. The USD/JPY pair failed to hit the 100.00 level again, and as reported at 1:06 p.m. (JST) in Tokyo, slipped 0.6% in the overnight trading hours to 98.68 Yen. The EUR/JPY pair also edged lower, trading at 128.66 Yen, a loss of 0.8%. The Euro, considered a commodity-link currency, was also lower against the U.S. Dollar trading at $1.3040, a 0.2% loss and analysts say that expectations of an interest rate cut by the European Central Bank are likely to keep the common currency under considerable pressure.