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Forex - Yen up despite weak current account, focus on China, Greece

Published 02/08/2015, 07:56 PM
Updated 02/08/2015, 07:58 PM
© Reuters.  Aussie weaker

Investing.com - The Japanese yen held stronger on Monday after disappointing current account data and as the markets keeps a wary eye on Greece and pondered the next moves by China after imports slumped in January.

USD/JPY traded at 118.92, down 0.17%, while AUD/USD changed hands at 0.7752, down 0.460. EUR/USD traded at 1.1314, down 0.02%.

Japan reported the adjusted current account for January with a deficit of ¥187 billion, compared to a forecast of a ¥358 billion surplus.

Earlier, Reserve Bank of Australia Governor Glenn Stevens said Australian companies and financial system must be prepared for a fast-growing increase in use of the Chinese yuan for trade.

Clearing banks help raise awareness among Australian companies that the local financial system can affect cross-border yuan transactions on their behalf, Stevens told the Bank of China renminbi Clearing Bank launch in Sydney.

"This is important because over the long run Chinese firms may increasingly wish their trade with Australian firms to be settled in RMB," he said.

Greece's Prime Minister, Alexis Tsipras reiterated Sunday that he will not ask for an extension of the current EU funding program ending Feb. 28, and will seek a new deal with the creditors as his government is not recognizing past agreements.

At the weekend, China reported that exports fell 3.2% in January and imports slumped 19.7% in yuan terms with the overall trade balance at a positive $60.3 billion. In dollar terms, exports slumped 3.3% from a year earlier last month, missing expectations for a 6.3% increase, while imports tumbled 19.9%, much worse than forecasts for a decline of 3.0%.

The data is expected to put more downwards pressure on the yuan exchange rate. But the government has stopped short of engineering a sharp depreciation of the exchange rate, despite similar moves by other global central banks.

Last week, the dollar rallied against the euro and the yen on Friday after a robust U.S. employment report reinforced expectations for a mid-year rate hike by the Federal Reserve.

The Labor Department reported that the U.S. economy added 257,000 jobs in January, far more than the 234,000 forecast by economists.

December’s figure was revised to 329,000 from a previously reported 252,000. While the unemployment rate ticked up to 5.7% last month from December’s 5.6% hourly earnings and the participation rate both saw increases in January.

The upbeat jobs report was seen as strong enough to indicate that the Fed will remain on track to start raising rates from near zero levels as early as June.

The euro remained under pressure as concerns over Greek debt negotiations continued to weigh on market sentiment.

Standard and Poor’s downgraded Greece to B- from B late Friday, one notch above default, and kept the outlook at "negative", indicating that further ratings cuts are possible.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.02% to 94.82.

In the week ahead, the euro zone is to release what will be closely watched data on fourth quarter economic growth on Friday. Investors will also be focusing on Thursday’s inflation report from the Bank of England and Friday’s U.S. consumer sentiment data.

On Monday, in the euro zone, Germany is to release data on the trade balance.

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