Dollar bounces back against yen despite soft China data

Posted On 16 May 2016

Tag: USD

Despite disappoint data out of China, the US dollar bounced back against the safe haven yen quite fast on Monday. Early in the Asian session, the greenback initially fell versus the yen to touch a low of 108.46 yen, retreating from two-week highs of 109.57 set on Friday, when the dollar gained a lift from upbeat US data. Strong US data on Friday helped offset worries over softness in Chinese economic indicators.

Chinese investment, factory output and retail sales all missed forecasts, adding to doubts about whether the economy is stabilizing. Industrial production slowed to 6 per cent year-on-year in April from 6.8 per cent in March, while retail sales slowed to an annual pace of 10.1 per cent last month from a 10.5 per cent in March.

But market focus quickly turned back to Friday’s robust US data. US retail sales increased by 1.3 per cent in April, while US consumer confidence jumped to an 11-month high in May, according to the University of Michigan survey.
Meanwhile, the main risk for yen will be Japanese data this week, with March quarter gross domestic product numbers due out on Wednesday.

Economists expect quarter-on-quarter growth of 0.1 per cent, but some point to disruptions caused by the earthquake that hit the southern island of Kyushu in April and a broader malaise in consumer confidence as impediments to growth in the June quarter.

The Australian dollar was the best-performing Asian currency on Monday, up one-quarter of a percentage point.

Oil prices bounced back today, with Brent crude, the international benchmark, as much as 1.7 per cent higher to $48.66 a barrel — its highest level since November. West Texas Intermediate, the US marker, rose as much as 1.7 per cent to $47, but was sitting two cents short of reaching its highest level since November.

Gold was one-quarter of a percentage point stronger at $1,276.50 an ounce on Monday, while the dollar index, a measure of the US currency against a basket of global peers, was flat at 94.626.

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