By Kevin Buckland
TOKYO (Reuters) -The safe-haven Japanese yen rose on Wednesday, while riskier currencies such as the Australian dollar and pound sterling languished as traders sought cover after the worst sell-off in almost a month on Wall Street and big losses for Asian shares.
The catalyst was apparently some weak US manufacturing data, which fueled concerns of a hard landing for the world’s largest economy, with traders already nervous ahead of crucial monthly payrolls data on Friday.
“The bears are back with a bang,” said Michael Brown, senior research strategist at Pepperstone, adding that the poor factory numbers alone do not justify a market response of such magnitude.
“However, it does speak to participants’ increased sensitivity to incoming data, especially to negative surprises.”
The yen strengthened as much as 0.4% to 144.89 per dollar, before last rising around 0.2% to 145.15 as of 0525 GMT, after rallying 1% overnight against a broadly stronger dollar.
The dollar-yen pair typically tracks long-term US Treasury yields, which fell nearly 7 basis points (bps) overnight and continued to fall to 3.8253% in Asian hours as investors flock to bond safety were looking for.
However, the dollar stood firm against most other major peers as it tends to trigger safety bids even when the US economy is the focus of concern.
Sterling was steady at $1.3117, after falling 0.23% overnight. The euro rose 0.13% to $1.1058, after falling 0.26% in the previous session.
The Swiss franc, another safe haven, rose about 0.26% to 0.8480 per dollar.
The stock fell another 0.13% to $0.67025, continuing Tuesday’s 1.2% decline. Previously it had fallen by 0.4%.
Cryptocurrencies also faltered, with bitcoin and ether falling around 2.9% and 3.4% respectively.
Risks to the US soft landing scenario – which recently gained momentum in markets – caused traders to increase their odds of a Federal Reserve rate cut by 50 basis points (bps) to 38% on September 18, up from 30% one day earlier. to the CME Group (NASDAQ:) FedWatch Tool.
Economists polled by Reuters expect Friday’s report to show an increase of 165,000 U.S. jobs in August, compared with an increase of 114,000 in July.
Ahead of this, investors will be keeping a close eye on Wednesday’s job openings and Thursday’s unemployment claims report.
US markets were closed on Monday for Labor Day, returning on Tuesday to a weak survey from the Institute for Supply Management (ISM), which showed factory activity in the country would remain subdued for some time.
“That should have been a gain, but actually fell, and has once again left people wondering whether the Fed may be too late to act,” said Sam Stovall, chief investment strategist at CFRA.
“This may be a short week, but it will be an important and crucial week for investor confidence,” he added. “People will continue to be on guard.”
