USD Weaker as JPY Strengthens on Safe Haven Flows

he dollar eased on Monday as the yen rallied amid drooping global stock prices and anxiety over potentially market-rattling economic data due this week from China and the United States.

Europe’s main bourses fell as a 25 percent slump in miner Glencore and a drop in Volkswagen shares added to a glum mood in markets.

Wall Street was off more than 1 percent, and the MSCI world equity index fell 5.33 points, or 1.39 percent, to 378.97.

“Risk aversion is driving trade and, if we see some more signs of weak Chinese data later this week, we could see increased buying of the yen,” said a London-based spot trader.

The dollar, which advanced broadly last week as U.S. Federal Reserve Chair Janet Yellen boosted expectations for U.S. interest rate hikes, was down 0.6 percent at 119.88 yen. The euro, too was lower by a similar margin at 134.08 yen. .

The dollar index was last off 0.07 percent after trading ahead before U.S. data showed an unexpected decline during August of contracts to buy previously owned U.S. homes. The data indicated the robust housing market could be losing steam.

The yen has been a traditional safe haven in the currency market, along with the Swiss franc, gaining during times of economic uncertainty or stress in financial markets. The dollar was off 0.30 percent against the franc.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza