USD/JPY moves off 2-month lows in calmer markets

Posted On 05 Jan 2016

Tag: JPY

USD/JPY managed to inch up a little higher in Asian trading today after recovering from a sharp drop to a 2-1/2 low of 118.70 yen on the first trading day of 2016. Today the pair rose to a high of 119.70. A rebound in Tokyo equity markets helped ease a risk-off mood prompted by soft Chinese economic data released the previous day.

The Nikkei and other Asian equity markets went from negative to positive. The Shanghai Composite opened 3% lower, but quickly recovered to positive territory. This followed la ower than expected USD/CNY fix and which helped calm markets.

The direction of the USD/JPY pair depends on risk sentiment. On Monday, concerns over instability in the Middle East combined with worries about a slowing Chinese economy (after weak Chinese manufacturing PMI data) led global stocks to tumble and the yen to strengthen due to its safe-haven status.

EUR/USD opened Asia at 1.0832 as soft German inflation overshadowed risk aversion. German CPI unexpectedly slowed in December, raising concerns that the European Central Bank would undertake more QE to fight deflation. EUR/USD traded in a 1.0815/40 range through the morning session.

AUD/USD opened in Asia at 0.7190 after selling off on China related risk aversion. The pair traded down to 0.7175 in early Asia but a lower than expected USD/CNY fix helped to underpin AUD/USD before the Shangahi Composite opened. China’s financial regulators and the central bank (PBOC) moved aggressively to restore confidence by intervening in the markets and this helped put a floor on the tumble in stocks.

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