The U.S. Dollar managed to steady in spite a major selloff in Asian equity markets although FX players remain wary given the recent U.S. economic data which suggested that the economy there wasn’t as strong as initially believed and which ratcheted up uncertainty that emerging market economies would be able to re-stabilize in the wake of last week’s rout of EM currencies. Both Japan’s Nikkei and the MSCI extended recent downtrends which continue to plague markets across the globe. Analysts are warning clients to avoid higher risk assets in the short term.
As reported at 1:09 p.m. (JST) in Tokyo, the USD/JPY pair was trading at a low of 100.77 Yen while the EUR/JPY hit a trough at 136.37 Yen, in both cases levels unseen since last November. The greenback recovered slightly against the Yen, however, and was last trading at 101.24 Yen, a gain of 0.3%, while the EUR/JPY edged 0.1% higher to 136.75 Yen. Meanwhile, the AUD/USD headed higher with a 1.5% gain to $0.8877 on the news that the Reserve Bank of Australia might be taking on a more hawkish posture which might mean an interest rate hike is more likely.
Labor Data in the Hot Seat
Yesterday, a survey of Purchasing Managers in the manufacturing sector showed an unexpected decline in activity in January, with the reading dropping from 57.0 to 51.3, very below expectations that the reading would decline to only 56.0. According to strategists, that has exacerbated investors’ fears on global growth and will certainly put the focus on the NFP data which will be released on Friday, which could offer some clues as to the Fed’s forward guidance relative to tapering.