Risk sentiment dwindled on Wednesday as global equities continued with their descent and oil prices fell sharply for a second day. Tokyo stocks closed down by 3.2% following a near 2% drop on Wall Street on Tuesday. But Chinese shares cut earlier heavy losses to end the day just 0.4% lower after being boosted by better-than-expected services PMI for January.
The US dollar drifted lower against the yen as risk aversion increased the yen’s attractiveness. The dollar hit a low of 119.41 yen before rebounding slightly to 119.90 yen in late session. Comments from Bank of Japan Governor Haruhiko Kuroda that the Bank stands ready to expand stimulus further if necessary dented the yen’s gains. Kuroda said the Bank is prepared to cut rates further into negative territory and can devise new tools if existing measures prove ineffective.
The euro also fell against the yen and was last trading at 130.87 yen. But it stood firm against the dollar and the pound at 1.0913 dollars and 0.7577 pounds.
The New Zealand dollar rose sharply on Wednesday following better-than-expected unemployment figures for the fourth quarter of 2015. The unemployment rate plummeted to 5.3% from 6% in the third quarter. Expectations were for a rise to 6.1%. The kiwi jumped to 0.6541 against the US dollar after the data and gained further on not-so-dovish comments by RBNZ Governor Graeme Wheeler. Speaking in Christchurch, Wheeler said “It would be inappropriate to attempt to offset the low oil price effect through the OCR” but added that monetary policy will continue to remain accommodative. The kiwi climbed to a 3-week high of 0.6584 in late Asian session.
Other commodity-linked currencies were not as bullish though with the Australian dollar attempting to recoup some of yesterday’s losses at 0.7051 versus the greenback. The Canadian dollar was also off yesterday’s lows as oil prices stabilised. The loonie was up at 1.4042 per US dollar in late Asian session.
US crude futures recovered back above $30 a barrel today, having fallen sharply yesterday after the American Petroleum Institute report showed a rise in US crude inventories. Prices could come under further pressure today ahead of the Department of Energy’s latest inventory report.
Coming up later today, January services PMI for the Eurozone, UK and the US will be eyed along with the ISM non-manufacturing composite and the ADP employment change figures for the US.
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