The yen was broadly firmer early on Wednesday as demand for the safe-haven currency picked up after disappointing Chinese trade data took the wind out of a global rally rooted in stronger risk appetites.
The dollar last stood little changed at 112.585 yen JPY=, having slid 0.7 percent overnight, while the euro was down 0.4 percent at 123.54 yen EURJPY=R, well off Friday’s high of 125.585.
The Australian dollar dipped under 84.00 yen AUDJPY=R, pulling further from a one-month high of 85.00 set on Monday.
European and U.S. stocks fell overnight while many commodities came under pressure after China’s exports tumbled by the most in over six years last month.
Tokyo’s Nikkei followed suit on Wednesday, shedding 1.6 percent and sustaining demand for the yen.
The soft China data highlighted risks facing the global economy, bolstering expectations for dovish outcomes at central bank policy reviews in Europe and New Zealand on Thursday.
The European Central Bank is considered almost certain to ease, which in theory would be negative for the euro, but no one quite dared to position for bold action given the ECB has disappointed before.
“The focal point is how long the market will attempt to price in the risk of the ECB meeting ending in disappointment. The euro could rise towards the $1.11 handle if attempts to pre-empt such risk continue,” said Masafumi Yamamoto, chief FX strategist at Mizuho Securities in Tokyo.
The common currency EUR= was down 0.3 percent at $1.0976. It slumped to a one-month low of $1.0825 last week but has pulled back since then.
Also on the defensive, the New Zealand dollar traded at $0.6744 NZD=D4, retreating further from Friday’s peak of $0.6820.
While markets only imply a small chance of a rate cut by the Reserve Bank of New Zealand, investors suspect it is only time before the central bank delivers another cut to the 2.5 percent cash rate.
“The RBNZ did signal a bias to ease in January and the risk is that it decides to move earlier to prevent further strengthening in the exchange rate,” analysts at BNP Paribas wrote in a note to clients.
In contrast, the Bank of Canada is expected to keep rates on hold as it waits to gauge what impact the government’s anticipated spending measures might have on the economy.
But a retreat in oil prices took a toll on the Canadian dollar, which slid to C$1.3440 per USD CAD=D4, from a 3-1/2 month peak of C$1.3262 set on Monday.
The Canadian dollar will look to the Bank of Canada’s policy decision due later in the session for incentive.
While the BOC is expected to stand pat on monetary policy and refrain from cutting rates further, any show of confidence towards the local economy – which has experienced expansion with oil prices having risen since the last meeting – is expected to bode well for the loonie.
The Australian dollar fared better among its commodity peers thanks to further gains in iron ore, Australia’s single biggest export earner. It stood at $0.7418 AUD=D4, still within reach of an eight-month high of $0.7486.