It was a mixed start to the week in Monday’s Asian trading as the strong yen continued to weigh on Tokyo stocks but higher oil prices boosted equities elsewhere. Shares in China’s main indices were up over 1.5%, buoyed by weaker-than-expected inflation figures, which raised expectations of looser monetary policy.
Annual CPI in China rose by 2.3% in March, less than the expected rate of 2.5% and the first time in five months that inflation has not accelerated. Producer prices were slightly stronger-than-expected though, coming in at -4.3% year-on-year versus estimates of -4.6%.
Meanwhile, the weak dollar supported the Chinese currency, which was firmer on Monday after the People’s Bank of China set a lower midpoint of 6.4649 yuan per dollar. However, the US currency’s losses against the yen are proving more problematic for Japanese authorities, as another government official on Monday warned that “one-sided” moves could warrant government action.
The dollar touched a fresh 17-month low of 107.62 yen on Friday, and was trading only marginally higher at 107.80 yen in today’s Asian session. A big slump in Japanese machinery orders did little to dampen sentiment for the yen. Machinery orders fell by 9.2% month-on-month in February, but the figure was slightly above estimates of a 12.4% drop.
In European currencies, the euro held above 1.14 dollars on Monday and the pound was also firmer. Sterling slid below 1.41 dollars on Friday following worse-than-expected manufacturing data, but managed to recover to 1.4137 dollars in today’s Asian session.
Commodity-linked currencies were supported by a sharp rally in oil prices on Friday. Crude oil prices jumped by over 6% on Friday after data showing the number of active US oil rigs declined to the lowest since November 2009. US oil futures were slightly down today at $39.46 per barrel, having climbed above $40 earlier in Asian trading.
The Canadian dollar was lifted by the higher oil prices, but the loonie got an additional boost by stronger-than-expected employment numbers on Friday. The greenback dropped by over 1% versus the loonie on Friday, but was re-testing the 1.30 level on Monday.
Gold prices extended last week’s rally into this week as investors pared back their expectations of US rate hikes. This helped the yellow metal to climb above $1250 an ounce for the first time in 3 weeks.
The rest of the day will be relatively quiet, with the only major data being industrial production figures out of Italy. However, a speech by the Fed’s Dudley at the start of US trading may attract some attention.