Demand for the safe haven Japanese Yen increased following the latest economic release out of China which showed that the preliminary factory output in February contracted for the second consecutive month, leaving investors wary that the emerging markets may be on a downward trend. The reading for the HSBC PMI report came in at 48.3, well below the 49.4 expected by economists recently surveyed and at a pace unmatched in more than five years. By definition, the 50.0 level is the demarcation point between an expansive economy and a contractive one. The outcome of the survey was that risk-related currencies, especially those tied to the Chinese economy such as the Australian Dollar, fell hard.
As reported at 12:30 p.m. (JST) in Tokyo, the AUD/USD lost 0.5% of its value to trade at $0.8957, slipping from the $0.9012 price hit ahead of the survey’s release. The USD/JPY pair dipped to 102.02 Yen, a loss of 0.3% while the EUR/USD traded at $1.3746, slipping from a 7-week peak at $1.3773.
Fed Minutes Supports Future Tapering
The greenback had initially been buoyed by the news that the Federal Reserve minutes confirmed the Fed’s resolve to continue tapering. The U.S. Dollar Index dipped to 80.141 .DXY, a loss of 0.1% after rising to 80.235 .DXY after the minutes’ release. According to the minutes, the current phase out of stimulus at a rate of $10 bilion a month is likely to continue unless economic events conspire to change the policymakers’ thinking.