The U.S. dollar and the Japanese yen, which slipped in early Tuesday Asian deals reversed their direction around 8:35 pm ET and registered strong gains in late trading as a decline in most Asian stocks prompted investors toward safe-haven currencies.
Most Asian stocks declined today despite the modest gains overnight on Wall Street. However, traders remained cautious ahead of a slew of economic data due this week as well as the U.S. Federal Reserve’s first meeting for the year starting later in the day.
China’s Shangai Composite index fell 1.4%, Hong Kong’s Hang Seng lost 1.6%, South Korea’s Kospi declined 2% and Japan’s Nikkei 225 index slipped 1.5%.
However, New Zealand stocks were up 0.6%. Markets in Australia were closed for a public holiday.
Media reports said today that the dollar and the yen gained on speculation China will step up measures to slow the world’s fastest-growing major economy.
At 12:10 am ET, the yen reached a new 9-month high of 126.23 per euro and it traded near 6-week highs of 89.57 per US dollar, 85.84 against the Swiss franc, 84.51 against the loonie and 63.55 against the kiwi. At the same time, the yen jumped to near a 5-week high of 80.48 against the aussie. Meanwhile, the yen hit as high as 145.21 against the pound by about 12:40 am ET.
Japan’s January small business confidence report released at 12:00 am ET also supported the yen, which showed the index rose to 41.3 from December’s 40.4 points.
Earlier today, the policy board of the Bank of Japan unanimously decided to retain the overnight call rate at 0.10%, in line with market expectations. The last change in the rate was a 0.10% cut in interest rates at the December 2008 meeting.
In an accompanying statement, the central bank said, “Japan’s economy is picking up mainly due to various policy measures taken at home and abroad, although there is not yet sufficient momentum to support a self-sustaining recovery in domestic private demand. In the conduct of monetary policy, the bank will aim to maintain the extremely accommodative financial environment.
At present, the yen is worth 126.4 against the euro, 89.7 against the US dollar, 145.5 against the pound and 85.96 against the franc.
At 12:20 am ET Tuesday, the dollar hit a 5-day high of 1.0455 against the Swiss franc, compared to a low of 1.0381 hit at 8:35 pm ET. As of now, the dollar-franc pair is worth 1.0444.
Against the euro, the dollar is currently trading at a 4-day high of 1.408. The dollar thus recovered from 1.4181 against the euro hit in early Asian deals today.
The dollar that plunged to a 4-day low of 1.6271 against the pound by about 8:35 pm ET Monday bounced back thereafter. At present, the pound-dollar pair is worth 1.620.
Traders will have a busy European session today, in which the German import price index for December, IFO business climate index for January, Swiss UBS consumption indicator for December, French consumer spending for December, Italian retail sales for November and consumer confidence for January, Euro-zone November current account and the U.K. preliminary fourth quarter GDP are expected to influence trading.
From the U.S., the S&P/Case-Shiller home price index for November is due at 9:00 am ET.
The Conference Board is scheduled to release its consumer confidence report for January at 10 am ET. At the same time, the Federal House Finance Agency-FHFA is set to release its house price index for November.