The safe-haven yen surged on Wednesday before retracing some of its gains amid concerns over a U.S. economic slowdown.
“If you embrace the idea of the U.S. slowdown gathering momentum, of the Fed ending up looking to cut rates next, rather than to hike any further, the then yen is the currency for you,” Kit Juckes, a strategist at Societe Generale, said in a note on Wednesday.
“It’s cheap on most metrics, is not currently undermined by a weakening Chinese yuan (despite soft Chinese data) and isn’t dependent on economic or policy surprises in Japan to propel it closer to USD/JPY 100,” he said.
Juckes pointed to Friday’s nonfarm payroll data as a test of the “new mindset” of expecting the U.S. economy would slow.
“The risk is that U.S. data are inconclusive, U.S. economic fears persist for a while, but news elsewhere remains gloomy enough that FX is a battle between a host of unloved currencies to see which is worst,” he said.
The U.S. dollar index was at 96.66 at 7:05 A.M. SGT, spiking up from as low as 95.85 early in Wednesday’s session, but off levels as high as 96.95, according to ICE futures data.
The 10-year U.S. Treasury note yield was at 2.62 percent at 7:59 A.M. SGT, off levels as high as 2.698 percent early in Wednesday’s session, according to Tullett Prebon data.
The euro/dollar was at 1.1328 at 8:02 A.M. SGT after trading in a 1.1311 to 1.1497 range on Wednesday, according to DZHI data.
Juckes said the euro wasn’t likely to show a rebound soon.
“Economic headwinds ae obvious, inflation surprises will likely be to the downside, and from EU elections to the appointment of a new ECB head, there is far too much uncertainty for the euro to grow wings,” he said, tipping a 1.12 to 1.18 range for the first quarter.
The British pound/dollar was at 1.2541 at 8:02 A.M. SGT after trading in a 1.2473 to 1.2773 range on Wednesday, according to DZHI data.
The dollar/yen was at 107.554 at 8:02 A.M. SGT after trading in a broad 104.707 to 109.726 range on Wednesday, tumbling from as high as 113.708 in mid-December, according to DZHI data.
The dollar/yuan ended Wednesday at 6.8596 after trading in a 6.8482 to 6.8765 range during the session, according to DZHI data.
The dollar/Singapore dollar was at 1.3671 at 8:03 A.M. SGT after trading in a 1.3621 to 1.3667 range on Wednesday, according to DZHI data.
The dollar/Malaysian ringgit was at 4.1440 at 8:1 A.M. SGT after trading in a 4.1300 to 4.1404 range on Wednesday, according to DZHI data.
The dollar/Indonesian rupiah ended Wednesday at 14,445 after trading in a 14,375 to 14,488 range during the session, according to DZHI data.