Dollar eases but yen firms as Kuroda fails to give clear signals

The US dollar was softer on Monday as it pulled away from Friday’s highs when it rebounded sharply from the brief tumble induced by the weaker-than-expected US jobs report. The dollar dropped below 103 yen after the August non-farm payrolls rose less than forecast, diminishing the odds of a September rate hike by the Fed. However, the figure was not so weak as to rule out a rate rise before the end of the year and the dollar recovered to a 5-week high above 104 yen.But the greenback was back down to pre-data levels in Asian trading today as the yen advanced against most major currencies despite Bank of Japan Governor, Haruhiko Kuroda, signalling that interest rates could be cut deeper into negative territory. Speaking earlier today in Tokyo, Kuroda reassured markets that the Bank will not be discussing ways on winding down the stimulus measures and reiterated that it is still fully possible to “further expand easing measures in terms of quantity, quality or interest rate”. The comments boosted shares in Tokyo but the lack of clearer policy direction drove the yen higher in currency markets. This dragged the dollar back below the 104 level at around 103.45 yen, while the euro was at 115.58 yen. A rise in China’s services PMI helped risk sentiment in today’s Asian session, adding to the signs that the slowdown in the world’s second largest economy may be bottoming out. The Caixin services PMI rose to 52.1 in August from 51.7 in July. The data boosted the Australian dollar, which is regarded as a liquid proxy for China’s economy. The aussie was also supported by a bigger-than-expected rise in gross company profits in the second quarter, which bodes well for second quarter Australian GDP data due on Wednesday, and eliminates any chance of a rate cut by the RBA tomorrow when it holds its regular policy meeting. The New Zealand also headed higher on Monday, aided by a broader recovery in commodity prices. The kiwi was last up 0.4% at 0.7327 against the greenback. In European currencies, the euro and the pound were firmer against the dollar today. The single currency was trading around 1.1170 dollars but may struggle for direction ahead of the ECB’s policy decision on Thursday. The pound meanwhile came off Friday’s one-month high to stand just above 1.33 dollars in late Asian session as investors eye the August services PMI for the UK out later in the day. There was little reaction by the markets to statements by the US and Japan over the weekend at the G20 summit concerning the UK’s exit from the European Union. The US said it would not prioritise a trade deal with the UK over current trade negotiations with the EU, while Japan warned that Japanese businesses could transfer their operations to other EU countries if the UK loses access to the single market. Looking ahead to the rest of the day, services PMIs out of the UK and the Eurozone will be watched along with the sentix index and retail sales figures for the euro area. There will be no major US data today as the US and Canadian markets will be closed for Labor Day.

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