Reuters: US Dollar Report: FOREX-Yen rises as Aussie falls on China growth concerns

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FOREX-Yen rises as Aussie falls on China growth concerns Apr 23rd 2013, 05:55 Tue Apr 23, 2013 1:55am EDT * Flash HSBC PMI for China points to tepid Q2 recovery * Aussie hits six-week low; yen rises broadly * Stop-loss dollar selling adds to dollar/yen's drop By Masayuki Kitano SINGAPORE, April 23 (Reuters) - The yen rose broadly and the Australian dollar hit a six-week low on Tuesday as a weak reading on the Chinese manufacturing sector stirred worries about the health of the global economy. The Australian dollar touched $1.0221, its lowest level since March 11, and last changed hands at $1.0234, down 0.3 percent from late U.S. trade. Growth in China's vast factory sector dipped in April as new export orders shrank, according to the flash HSBC Purchasing Managers' Index -- a preliminary survey of factory managers, suggesting the world's No.2 economy still faces formidable global headwinds in the second quarter. The gauge of manufacturing in China, Australia's biggest export market, triggered a renewed fall in the Aussie dollar, which only last week had suffered its biggest weekly percentage drop in nearly a year, hit by concerns about Chinese growth and a rout in commodity prices. Against the yen, the Australian dollar slid 0.9 percent to 100.98. The yen rose broadly, with the U.S. dollar falling 0.6 percent to about 98.71 yen. The dollar's drop versus the yen gained momentum after triggering some stop-loss dollar offers, said Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore. In addition, Japanese names and some short-term traders were spotted selling cross/yen pairs during Tuesday's Asian trade, Halley said. The dollar scaled a four-year high of 99.95 yen earlier this month, as yen fell after the Bank of Japan's unveiled its sweeping monetary stimulus programme. That marked a dollar rise of about 25 percent versus the yen since mid-November, when Shinzo Abe, who became Prime Minister in December, promised bold monetary and fiscal expansionary policies during his election campaign. A focal point for the yen now is whether the BOJ's aggressive monetary easing will prompt Japanese investors to increase their purchases of higher-yielding overseas assets, and how actively they will invest in foreign bonds without hedging against currency risk. JAPANESE CAPITAL FLOWS Japanese capital flows data, however, contains no sign so far that the BOJ's drastic stimulus has triggered any Japanese investor rush into overseas assets. Instead, they have repatriated money back home in the first two weeks of April. The yen could take its cues from the next batch of Japanese capital flows data due later this week, said Rob Ryan, Singapore-based FX strategist for RBS. "Are we getting to the stage where people would like to see some support from the Japanese (investor) community? We're not seeing it yet," Ryan said. If the data shows even modest outflows, that might be enough to keep alive expectations for more significant capital outflows down the road, he said, but added that there was also the risk of disappointment. Japan's biggest life insurer Nippon Life Insurance Co had said on Monday that it plans to slow its increase in domestic bond investment in the current fiscal year to March 2014, but plans to raise unhedged foreign bond holdings at an appropriate time this fiscal year. With Japanese interest rates staying low, Nippon Life would consider buying more foreign bonds without hedges when there are chances for bargains, a senior official for Nippon Life said, adding that the life insurer was cautious about current levels of the yen after its rapid fall over the past several months. The euro sagged 0.2 percent to about $1.3041, staying within its $1.30 to $1.32 range of the past couple of weeks. Keeping a lid on the euro were comments from European Central Bank policymakers that suggested the bank may be leaning towards a cut in interest rates. Link this Share this Digg this Email Reprints

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