The dollar rose against the yen on Monday as Japan’s leader criticised excessively volatile currency markets, and most regional equity markets gained, curbing demand for save-haven yen.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 1.8 per cent following a loss of almost 4 per cent last week, while Japan’s Nikkei stock index was up 5.5 per cent.
Chinese shares bucked the uptrend, following their week-long closure for the Lunar New Year holiday during which global stock markets logged steep losses. Chinese trade data also fell short of expectations, with January exports falling 11.2 per cent from a year earlier.
Separate data from Japan released earlier in the session showed its economy shrank more than expected in the final quarter of last year as consumer spending and exports slumped. Gross domestic product contracted by an annualised 1.4 per cent in October-December, bigger than a market forecast for a 1.2 per cent decline.
Against that backdrop, Japanese Prime Minister Shinzo Abe told parliament that “Excessive currency volatility is undesirable,’’ and said Tokyo will take appropriate action in the exchange rate market as needed.
Abe also said he hoped the Group of 20 finance leaders will take appropriate measures to address global economic problems when they meet in Shanghai next week.
The prime minister’s comments helped the dollar hit its session high of 113.87 yen. It was last up about 0.5 per cent at 113.77, pulling away from last week's 15-month trough of 110.985.
“The dollar was already off its lows but Abe reminded markets that intervention is a possibility,’’ said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.
The euro fell about 0.3 per cent to $1.1219, having slipped from last week's 3-1/2 month peak of $1.1377. But it gained on the yen, adding 0.2 per cent to 127.66 and pulling further away from a 2-1/2 year low of 125.795.
Stronger yuan midpoint
The People's Bank of China (PBOC) took the opportunity of the US dollar’s recent decline to fix its yuan at its highest in over a month on Monday CNY=SAEC, hoping to deflect speculation about a possible devaluation.
Perhaps in an effort to head off any adverse reaction from Chinese investors, central bank governor Zhou Xiaochuan said there was no basis for the yuan to keep depreciating.
In a well-timed interview with the Chinese financial magazine Caixin published at the weekend, Zhou said China would keep the yuan basically stable versus a basket of currencies while allowing greater volatility against the US dollar.
For now though, investors were still soothed by last month’s welcome bounce in US consumer spending, which offered hope the economy was picking up after slowing to a crawl at the end of 2015.
The Australian dollar shrugged off the downbeat China trade data and benefited from improved risk appetite, adding 0.7 per cent to $0.7152, while the kiwi added 0.4 per cent to $0.6652.