Japan Stock Still In Turmoil

stockEmerging-market currencies such as the Turkish lira and South African rand fell further against the dollar Friday, as worries about a Chinese slowdown and prospects of rising U.S. rates triggered a broad flight out of emerging-markets assets.

The Chinese manufacturing sector showed an unexpected contraction in January, heightening fears about the future of emerging-market economies that depend on China for trade or its demand for commodities.

?Pressure in the more vulnerable [emerging-market] capital markets continues and has attracted significant global attention, driving risk aversion higher on fears of possible contagion outside of the epicenters,? said Camilla Sutton, chief foreign-exchange strategist at Scotiabank, in a note.

The dollar ?jumped to another record high against the lira, fetching 2.3376 lira from 2.2929 lira late Thursday. That?s the tenth-straight session of wins for the dollar against the lira , boosting its weekly gain to 4.7%.

Meanwhile, the greenback ?rose to 11.1016 rand from 10.9912 rand late Thursday, for a weekly gain of 2.2%.

The reaction to mounting concerns about emerging markets has been ?typical,? Sutton said, pointing to strength in Treasurys and currencies like the yen, while stocks weakened.

The dollar ?slid to ?102.24 from ?103.10 late Thursday. That?s the lowest level since early December, according to FactSet data.

The dollar dropped more than 1% against the yen on Thursday in the wake of the Chinese data, as well as a decline in a preliminary gauge of U.S. manufacturing to a three-month low this month, with some of the slowdown stemming from cold weather.

The strength in the yen came after it sold off significantly against the dollar late last year, making it an ?easy place to go for safe-haven value,? said Andrew Dilz, a currency trader at Tempus, Inc. ?I think it?s a temporary move,? he added, especially if the Federal Reserve decides to further reduce its monthly bond purchases next week.

The ICE dollar Index, a measure of the U.S. unit against six other major currencies, was at 80.457 versus 80.442 late Thursday in North America. For the week, the dollar index lost 0.9%. The WSJ Dollar Index, a rival measure of dollar strength, inched up to 74.10 from 74.04.

The euro weakened to $1.3676 from $1.3691 late Thursday. The British pound ?eased to $1.6501 from $1.6635, after breaking above the $1.66 level for the first time since May 2011. The euro gained 1% against the dollar for the week, while the pound was up 0.5%.

At Davos, Bank of England Governor Mark Carney said the central bank will update its forward guidance on interest rates next month. The announcement came after the U.K. unemployment rate dropped to 7.1% in the three months to November, just above the 7% level set out by the forward guidance as a level for considering a rate hike.

The Australian dollar ?couldn?t shake off its 1.1% fall on Thursday, declining further to 87.03 U.S. cents from 87.64 U.S. cents. The Australian dollar was hit following the data from China, which is Australia?s largest export market. For the week, the Aussie lost 1% against the greenback.

Italy’s Economy Minister Fabrizio Saccomanni pushes back against criticism that the pace of reform in Italy is too slow, saying that Rome is ready to push through important institutional reforms this year, while a privatization drive will help keep Italy’s public finances in check.

Country-specific issues are also rattling emerging-market currencies, including a slide in Argentina?s peso after the central bank eased off its intervention efforts to prevent foreign reserves from declining further.

Emerging-market stocks declined further on Friday, a day after the MSCI Emerging Markets Exchange-Traded Fund ?fell to a? more-than four-month low .

Source MarketWatch


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