MW: Dollar lower against yen, euro amid Asia stock markets slump
TOKYO--The dollar was lower against the yen and the euro in Asian trade Monday, with weakness in Asian stock markets again prompting flights to the perceived safety of the Japanese and eurozone currencies.
The greenback USDJPY, -0.44% was at ¥121.56, compared with ¥121.70 late Friday in New York. The U.S. currency was also weaker against the euro EURUSD, +0.2861% which rose to $1.1243 midday from $1.1187.
The WSJ Dollar Index BUXX, -0.05% a measure of the dollar against a basket of major currencies, was down 0.2% at 88.31.
Despite comments from the U.S. Federal Reserve’s No. 2 official over the weekend, interpreted as being slightly hawkish by Tokyo-based currency dealers and analysts, the greenback was under selling pressure against the yen and the euro from earlier in the session.
Market participants pointed to a Financial Times report that China will avoid massive share purchases after an over $200 million two-month spree to support stocks, which sparked concerns about another round of a stock market sell-off.
Then, later in the session, both Tokyo stocks and China stocks opened lower, intensifying the risk-averse mood after a China-induced global stock market sell-off just a week ago.
In Tokyo, the Nikkei Stock Average NIK, -1.28% was down 1.4% at 18,853.38, on track to close lower after a three-day winning streak. After opening weaker again, the Shanghai Composite Index SHCOMP, -0.82% was recently trading 2.2% lower.
In times of stress such as stock market instability, investors seek refuge in traditional safe harbor currencies such as the yen. The euro EURUSD, +0.2861% is also being perceived as a safe haven, rallying to a seven-month high of $1.1713 early last week at the height of the global markets rout. The euro last changed hands at $1.1248.
“The market has turned into a risk-off mood,” said Mizuho Securities’ chief foreign-exchange strategist, Kengo Suzuki. Investors will focus on China’s manufacturing data for August scheduled to be released Tuesday and events such the G-20 finance ministers’ meetings in Turkey, with focus shifting later in the week to the U.S. jobs data due Friday, said Suzuki.
Resource-related, risk-sensitive currencies such as the Australian dollar were sold on stock market weakness. The Australian dollar AUDUSD, -0.3627% dropped to $0.7147 and ¥86.46 AUDJPY, -0.83% midday from $0.7172 and ¥87.27, respectively. The New Zealand dollar NZDUSD, -0.6344% weakened to $0.6425 and to NZDJPY, -1.08% ¥77.74 from $0.6463 and ¥78.66, respectively.
At the U.S. central bank’s annual Jackson Hole conference, Fed Vice Chairman Stanley Fischer avoided sending a signal on whether the Fed would start raising rates, which investors interpreted as a sign that the Fed has left open the possibility for raising short-term rates at its September policy meeting. In addition, Fischer said there is “good reason” to think sluggish U.S. inflation will firm.
