The US dollar weakened against the Japanese yen and climbed versus other major currencies as poor economic data from various regions dented optimism about an imminent global recovery, prompting investors to sell riskier assets and seek the perceived safe-haven Japanese yen. In a strong demonstration that the global economy is still struggling, figures showed China's annual economic growth slowed to 6.1 percent in the first quarter, its weakest on record, from 6.8 percent in the final three months of last year. As a result, the theme in the market has turned to a slight rise in risk aversion as some investors had hoped a stellar growth report from China would support arguments the world economy was forming a bottom, a view that continues to divide markets.
The euro extended its losses against the US dollar as bleak data reinforced concerns about the Eurozone economy. Figures showed Eurozone industrial output plummeted by a record 18.4 percent year-on-year in February and inflation was confirmed rising 0.6 percent in March from the same period a year ago, reinforcing expectations that the Eurozone economy is deteriorating and that interest rates may fall further. A general sense of negative sentiment against the euro is overtaking the market with visible signs of green shoots of recovery in other countries but not in the Eurozone.
Sterling fell broadly as global economic and US earnings concerns encouraged investors to scale back their exposure to risk, causing the pound to reverse much of its recent gains. The pound and other currencies seen as higher risk also came under pressure as figures showing the weakest quarterly Chinese growth since records began in 1992. As risk appetite diminishes, the currencies that tend to suffer the most are those who have gained the most recently, and sterling has been one of the best performing currencies.
The Japanese yen jumped against the US dollar and other major currencies after news that China's economic growth slowed, disappointing investors who had bought higher-yielding currencies as risk aversion eased. The yen should continue to remain steady on safe haven flows in the short term.
The Canadian dollar touched its highest level in more than 13 weeks against the US dollar, helped by rising global equities, firmness in oil prices and data showing a slight rebound in domestic factory sales.
The Australian dollar reached sixth-month peaks but the disappointing China growth report took the steam out of its rebound, which had been driven by optimistic bets the world economy was stabilizing. The news was significant for the Aussie as China is Australia's biggest trading partner and a major buyer of Australia's key commodity exports. The New Zealand dollar also slipped after China, a major trading partner for New Zealand, posted its weakest pace of economic expansion on record in the first quarter.
