The yen rose sharply on Tuesday as risk aversion set in and comments from the Japanese prime minister added further support to the currency. Speaking to the Wall Street Journal, Prime Minister Shinzo Abe said he was against “arbitrary intervention” of devaluing currencies “whatever the circumstances”.
The dollar touched a near 18-month low of 109.94 yen after the comments yesterday, but had recovered slightly to 110.35 yen in Wednesday’s Asian session. The euro and the pound were also under pressure against the Japanese currency and last stood at 125.34 and 155.93 yen respectively.
Although a strong yen would be viewed unfavorably by the Bank of Japan, it is thought that Japanese officials would not risk angering their G7 counterparts ahead of the May summit, which is being hosted by Japan.
In China, the Caixin services PMI out today showed activity in the services sector improved in March from the previous month. The PMI reading rose to 52.2 in March from 51.2, but it was bad news for the jobs market as the employment sub index dropped below 50, indicating a loss of jobs in the sector. The composite PMI, which also includes the manufacturing sector, climbed to 51.3 from 49.4, following a strong improvement in the manufacturing PMI last week.
The Australian dollar, which often serves as a liquid proxy to the Chinese economy, firmed slightly after the data to climb to an intra-day high of 0.7568 versus the greenback. Meanwhile, the New Zealand dollar also got off on a stronger footing on Wednesday, despite global dairy prices continuing to decline as per the latest global dairy auction on Tuesday. The kiwi was trading around 0.68 in today’s Asian session.
In European currencies, the euro drifted lower versus the dollar to fall to 1.1358 during Asian trading, but was steady against the pound at 0.8034. Better-than-expected industrial production figures out of Germany had little impact on the single currency. German industrial production dropped by 0.5% month-on-month in February, much less than the expected 1.8% decline.
Crude oil prices bounced back yesterday as hopes grew that an agreement would be reached on April 17 when major producers are due to meet, following comments from a Kuwaiti official. US oil futures climbed towards $37 a barrel to stand at $36.77 in late Asian trading.
The rest of the day will be relatively quiet, with the only significant data being the crude oil inventories numbers from the US Department of Energy. But the focus will likely be on the FOMC minutes of the Fed’s March meeting, which are due at 18:00 GMT. A speech by the Fed’s Mester may also attract some attention.