Yen gained broadly on Thursday as risk appetite ebbed in the broader markets and lifted the safe-haven Japanese currency, while the dollar held the bulk of its gains against other major currencies after rebounding from 11-week lows.
Equities in Asia slipped as risk sentiment deteriorated amid uncertainty towards the United States and China clinching a deal on the sidelines of the June 28-29 Group of 20 summit meeting in Japan.
The mood in the region’s stock markets was also subdued as Hong Kong shares plunged for second day following massive street protests.
The yen rose 0.2% to 108.270 yen per dollar, pulling back from an 11-day low of 108.800 brushed at the week’s start.
The yen, which tends to attract bids in times of market turmoil and political tensions, rallied 0.5% against the Australian dollar and advanced 0.15% versus the euro.
“The risk aversion and falling stock markets are supporting the yen as usual,” said Bart Wakabayashi, Tokyo branch manager for State Street Bank and Trust.
“The Australian dollar’s underperformance is also a booster for the yen. Today’s Australian jobs data did not appear particularly poor, but apparently some in the market saw the data as another opportunity to sell the Australian dollar. ”
Australia’s unemployment rate stayed stuck at 5.2% in May as a surge in part-time hiring was met by an ever-expanding pool of labor, a sure sign of spare capacity that argued for another cut in interest rates perhaps as soon as next month.
The Australian dollar which fell the previous day on sliding crude oil prices, extended losses and fell to a two-week trough of $0.6905.
Despite mounting expectations that the Federal Reserve will ease monetary policy in coming months, the dollar fared better against other major currencies,such as the euro, pound and commodity currencies, which had troubles of their own.
The dollar index versus a basket of six major currencies was little changed at 96.919 after rising more than 0.3% overnight.
The index had dropped to 96.459 on Monday, its lowest since late March, following a sharp decline in long-term U.S. Treasury yields, which fell to near two-year lows last week after a soft U.S. jobs report bolstered expectations for an interest rate cut by the Fed.
The euro took a hit after U.S. President Donald Trump said on Wednesday he was considering sanctions over Russia’s Nord Stream 2 natural gas pipeline project and warned Germany against being dependent on Russia for energy.
Sterling slipped as British lawmakers on Wednesday defeated an attempt led by the opposition Labour Party to try to block a no-deal Brexit.
“Thanks to the poor performance of European currencies, the dollar has managed to rise although the latest inflation data enhanced Fed rate cut expectations, ” said Takuya Kanda, general manager at Gaitame.Com Research Institute.
“The market now considers monetary easing by the Fed as a foregone conclusion. At the end of the day, the dollar will still remain a relatively high yielding currency even after a rate cut or two.”
Data released on Wednesday showed U.S. consumer prices barely rose in May, pointing to moderate inflation that together with a slowing economy increased pressure on the Fed to lower interest rates this year.
The euro was a shade higher at $1.1294 after retreating 0.35% overnight, while the pound stood little changed at $1.2692 following a loss of 0.3% on Wednesday.
The dollar was also buoyed as commodity-linked currencies were pressured by a slump in crude oil prices.
The Canadian dollar was little changed at C$1.3337 per dollar after shedding roughly 0.5% the previous day.
Oil prices tumbled 4% on Wednesday to their lowest settlements in nearly five months, weakened by another unexpected rise in U.S. crude stockpiles and by a dimming outlook for global oil demand.