Yen strengthens as markets begin with slight risk aversion

Markets in Asia had a relatively quiet morning session. Japan’s Nikkei was down 0.9 per cent, while Australia’s S&P/ASX 200 was 1 per cent higher with a burst of merger activity in the telecommunications sector.

In Chinese markets, the Shanghai Composite was down 0.2 per cent and the Shenzhen Composite was up 1.4 per cent, even though data this morning showed industrial profits in China fell in August at their fastest year-on-year pace in at least 47 months.

Among major currencies the Japanese yen was 0.2 per cent stronger at Y120.39 per greenback, while the Australian dollar was flat at US$0.7026. Malaysia’s ringgit was 0.2 per cent weaker at 4.3938 per dollar, yet another fresh low since the Asian financial crisis of 1998.

Late last week investors took on board comments from Fed Chair Janet Yellen that the US central bank was on track to raise interest rates this year, in spite of citing turmoil in international financial markets and a slowdown in emerging economies as reasons why it kept rates on hold the previous week.

The prospect of higher US interest rates this year caused a sell-off in government bonds on Friday, and the US dollar to strengthen against a basket of its global peers. Those moves were being slightly reversed in Asia on Monday, however, with bonds recouping declines and regional currencies mixed versus the greenback.

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