Yen surges to 1 year high, Rand collapses as China CPI causes market jitters

The market focus at the start of the new trading week was on Chinese stocks again. China’s inflation data failed to reassure investors after December CPI rose 1.6% year-over-year in data released on the weekend. It matched the consensus estimate and was slightly higher than the 1.5% y/y November reading. The PPI was down 5.9% y/y in a sign that inflation pressures remain on the downside.

The Shanghai Composite Index and the CSI300 index both fell around 1 percent in erratic early trade. MSCI’s broadest index of Asia-Pacific shares outside Japan sank 2 percent, as did Australia’s main index . E-mini futures for the S&P 500 were down 0.7 percent in a sizable move for Asian hours.

Currency markets saw some wild swings with the South African rand collapsing to record lows at one point before bouncing. Risk aversion sent investors into the arms of the safe-haven yen and sovereign bonds.

The rand was down 2.3 percent at 16.6832 per dollar, after rebounding from its steepest intraday slump since October 2008. The yen gained versus the dollar to its strongest level in a year. USD/JPY dipped to 116.70 in early Asian trading before bouncing back above 170.00.

China’s slowdown adds to concerns over a global glut in oil. West Texas Intermediate crude fell a sixth straight day, losing 2.1 percent to $32.45 a barrel, after sliding 10.5 percent last week.

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