USD/JPY slips as safe haven demand lifts yen, China PMI disappoints

USD/JPY fell to 120.57 on Tuesday, from late U.S. session levels of 121.65, maintaining its descent from Friday’s high of 121.76. The dollar was hurt by a disappointing U.S. data on the Chicago PMI. The yen gained on safe haven demand, as Chinese PMI data also disappointed. Manufacturing PMI came in at 49.7, the lowest in three years, highlighting the slowdown in the world’s second largest economy. Any number below 50 implies contraction.

EUR/USD bounced back to $1.1276, extending its recovery from last week’s one-week low of $1.1156. Investors often use low-yielding currencies to fund positions in higher-yielding currencies, so a worsening outlook for equity markets tends to boost currencies such as euro.

As a result, the dollar’s index against a basket of six major currencies, which rose 1.2 percent last week as risk sentiment somewhat recovered, stepped back to 95.922 from last week’s high of 96.324.

U.S. stock futures fell one percent in Asia on Tuesday, extending their fall on Monday.

With investors gripped by fear the global economy could be tripped by slowdown in China, even rises in U.S. debt yields rise on Monday following Fischer’s comments and spike in oil prices did not provide the dollar much of a boost.

GBP/USD traded to a high of $1.5404.

AUD/USD slipped to $0.7101 before bouncing to 0.7153 after the Reserve Bank of Australia held interest rates at 0.2 percent.

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