|
 The dollar traded at 108.335 yen after sliding to a three-week low
of 107.82 yen , further recoiling from a six-year high of 110.09 set
a week ago. The euro dipped to its lowest in a month to 136.50 yen
before edging back to 136.90.
Data on Tuesday showed German industrial output fell 4.0 percent in
August from July, the biggest decline since the height of the
financial crisis.
At the same time, the IMF nudged its global growth forecast down to
3.3 percent for this year from 3.4 percent, warning of weaker growth
in core euro zone countries, Japan and big emerging markets such as
Brazil.
Slightly at odds with the IMF, Bank of Japan Governor Haruhiko
Kuroda remained upbeat on Tuesday about the economic outlook and
shrugged off the need to expand the bank's already massive stimulus
program.
The disappointing German data, combined with the gloomy IMF
forecast, knocked European and U.S. stocks sharply lower.
Safe-haven U.S. Treasuries rallied strongly, sending yields sliding
again. The 10-year yield fell as far as 2.337 percent, bringing into
view a 14-month trough of 2.303 percent set in August.
The USD/JPY pair tends to track U.S. yields quite closely, partly
because of the prevalence of carry trades where investors borrow yen
at low rates to buy U.S. assets.
"Markets looked to be searching for reasons to take back risk off
the table as they factor in the reality of some global growth
slowdown and still present geo-political risks," said David de Garis,
senior economist at National Australia Bank.
"They found it in the form of another downside data surprise from
Germany with its weaker industrial production report and then a
global growth downgrade from the IMF in their latest World Economic
Outlook."
Dollar bulls are being forced to temper their enthusiasm for now,
particularly as yields have showed no inclination to rise even in
the face of last Friday's solid non-farm payrolls report.
[to top of second column] |
"The dollar losing a yen a day seems too fast. That said, the
dollar's surge from September onwards was overdone. When considering
the tightening of two-year yield spread between U.S. and Japanese
debt, we should not be surprised to see dollar weaken further versus
the yen," said Masafumi Yamamoto, market strategist for Praevidentia
Strategy in Tokyo.
The spread between two-year U.S. Treasuries and JGBs stood at 46
basis points after going beyond 50 basis points in late September,
its widest since 2011.
The dollar index was at 85.873, off a four-year high of 86.746 hit
on Friday.
Growth concerns in the euro zone and Japan and a lack of global
inflationary pressure meant there was no urgency for the Federal
Reserve to raise interest rates, even as it winds up its bond-buying
stimulus program soon.
Minneapolis Federal Reserve Bank President Narayana Kocherlakota
said as much on Tuesday, arguing that low inflation compels the Fed
to wait on rate increases, despite the fall in unemployment.
The euro was little changed at $1.2630 after pulling further away
from a two-year trough near $1.2500 set on Friday. Its Australian
peer fetched $0.8774, well off Friday's four-year low of $0.8642.
The short squeeze in the Aussie came even after the Reserve Bank of
Australia said on Tuesday the level of the currency was still
historically high despite its 6.3 percent drop against the greenback
in September.
(Editing by Andre Grenon & Shri Navaratnam)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
