Risk-off move boosts yen versus dollar

A stack of credit cards and American dollars.
Getty Images

The U.S. dollar fell against the Japanese yen on Thursday morning, though it was steady against the euro, on diminished risk appetite amid ongoing political turmoil in Hong Kong and weak data from Asia and Europe.

The Japanese yen and Swiss franc, both safe-haven assets, were up 0.42% and 0.21% against the dollar in early trade. That risk-off move also bolstered U.S. Treasury bond prices and hit the Dow Jones and Nasdaq indexes, all common risk-off market reactions.

"The developments in Hong Kong that started Asia off on a negative note, the ongoing turmoil that's going on in Latin America, in particular Chile," were driving trade this morning said Paresh Upadhyaya, director of currency strategy and portfolio manager at Amundi Pioneer Investments.

Hong Kong pro-democracy protesters paralyzed parts of the city for a fourth day on Thursday, forcing schools to close and blocking highways, as students built campus barricades and the government dismissed rumors of a curfew.

"Then we had a slew of disappointing macroeconomic numbers out of Australia, Japan and China. As New York opened up, you had those three factors that weighed on sentiment."

China's factory output growth slowed more than expected in October, Japan's economy ground to a standstill in the third quarter and the German economy only narrowly avoided a recession in the third quarter.

The dollar, however, was higher against the euro in mid-morning trade. The dollar generally gains toward the end of the year as investors wind down trading, and demand has been strengthened this year by higher interest rates and stronger economic growth in the United States.

Also on Thursday, the Labor Department reported that U.S. producer prices increased by the most in six months in October, lifted by gains in the costs of goods and services, further bolstering the Federal Reserve's stance that it will probably not cut interest rates again in the near term.

"The fact that wholesale inflation did surprise to the upside I think does speak to the narrative that core PCE, the Fed's measure of inflation, should hit or even breach the Fed's target of 2%," said Upadhyaya.

"This vindicates the Fed's stance of this current easing as a mid-cycle rate adjustment."