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Asian Session – Yen extends gains as risk sentiment sours on China data, N. Korea

China dominated the market focus again on Wednesday, as a weaker-than-expected Caixin services PMI dampened risk sentiment.

Safe haven flows moved back to the Japanese yen as investors were concerned about slowing growth in the world’s second largest economy.

A private survey carried out by Caixin showed the services PMI for December came in at 50.2, having printed a reading of 51.2 in November. Today’s figure was the lowest in seventeen months and was below the expected reading of 52.3.

Meanwhile, the manufacturing PMI, reported earlier in the week, came in at 48.2 in December, also below expectations and below the prior reading of 48.6.

Souring sentiment toward riskier assets helped boost safe-havens such as the Japanese yen and US Treasuries. In addition to the disappointing data out of China, geopolitical issues also impacted markets today. Risk appetite was dented after news that North Korea claimed that it successfully tested a hydrogen bomb.

The dollar extended losses against the yen for a third day and fell to 118.34 yen, the lowest level since October 15 of last year. The aussie suffered as well and dropped to $0.7098 versus the greenback since China is a top destination for Australian exports.

Meanwhile, the offshore Chinese yuan fell to 6.6915 against the greenback, the lowest rate in five years.

Looking ahead to the European session, markets will focus on a slew of services PMI releases out of the Euro zone, the UK and the US. The publication of the FOMC minutes will also be important to watch, as well as the ADP jobs numbers.

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