Firmer stock markets put yen and euro under pressure

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[October 01, 2015]  By Anirban Nag

LONDON (Reuters) - The safe-haven yen and the low-yielding euro came under pressure on Thursday, as global stock markets edged higher after their worst quarterly performance in four years.

The euro was also hit by expectations the European Central Bank will expand quantitative easing after a subdued eurozone inflation report. The Bank of Japan's tankan corporate sentiment survey sent mixed signals, weighing on the yen.

The euro was down 0.3 percent at $1.1145 <EUR=>, while the dollar was buying 120.15 yen <JPY=>, up about 0.3 percent from late U.S. trading.

Both currencies performed well last quarter, after investors cut risky carry trades funded in both currencies when China devalued its currency and triggered worries about global growth, dragging down stocks and commodities.

Data from China on Thursday showed the world's second- largest economy was still on shaky ground but doing better than some had forecast. European stock markets were more than 1 percent higher, following on from Asian markets. [MKTS/GLOB]

The final Caixin/Markit China Manufacturing Purchasing Managers' Index (PMI) slipped to 47.2 in September, up from a preliminary reading of 47.0 but still its lowest since March 2009 and a deterioration from August's 47.3.

China's official PMI, released separately, inched up to 49.8 in September from the previous month's reading of 49.7, though it still showed contraction for the second month.

"The Chinese data was just slightly better and this is lending some confidence to investors," said Neil Mellor, currency strategist at Bank of New York Mellon. "Having said that, euro/dollar is still stuck within familiar ranges."

Markets focused on the China surveys after the Federal Reserve left interest rates unchanged last month, citing worries about the global economy, particularly China.

"The big picture is still that the outlook for the global economy remains very subdued, mainly due to weak Chinese growth," said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.

The BOJ's tankan survey showed confidence at big Japanese manufacturers worsened, leading some to bet that the central bank could take further stimulus steps. But service-sector sentiment improved for the fourth straight quarter, reaching its highest level in more than two decades.

Investors still expect the monetary policies of the BoJ and the ECB will diverge from that of the Federal Reserve as U.S. employment improves. In the medium term, that should help the dollar.

Economists expect Friday's U.S. nonfarm payrolls report to show that employers added 203,000 jobs in September, according to a Reuters poll.

(Additional reporting by Lisa Twaronite, editing by Larry King)
 

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