The Dollar and the Yen rise as Chinese exports slump

The dollar and the yen gained after China’s government said exports plunged by a record last month, reviving demand for the two currencies as a refuge from the deepening global recession. The U.S. and Japanese currencies strengthened versus those offering higher yields such as the Australian dollar after China’s customs bureau said the trade surplus narrowed to the least since February 2006. “The sharp plunge in exports means China’s growth could slow, boding ill for the region’s economies,” said Masashi Kurabe, head of currency sales and trading in Hong Kong at Bank of Tokyo-Mitsubishi UFJ Ltd. This is “sparking buying of the dollar and the yen.” The USD/JPY is currently trading at 98.45 as of 8:45am, GMT.

The euro fell for the first time in four days against the yen on speculation European Central Bank council member Erkki Liikanen will signal policy makers may cut interest rates further. Policy makers are ready to cut rates to zero if necessary, ECB Executive Board member Lorenzo Bini Smaghi said, according to a report in the Boersen-Zeitung newspaper yesterday. The Australian and New Zealand dollars retreated from one-week highs after China said its trade surplus plunged as exports fell by a record, raising speculation demand for the South Pacific nations’ commodities will weaken. “The markets have been spooked by the weak figures, particularly the Chinese export numbers,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney. “The sell-off has gone a little too far in the near-term and the Aussie should recover back to 64.50 U.S. cents,” she said. The EUR/AUD is currently trading at 1.9701 as of 9:00am, GMT.

The pound fell to its weakest in more than five weeks against the euro after Britain’s housing sales slipped to the lowest level since at least 1978 and manufacturing shrank the most in four decades. The U.K. currency dropped for a third day versus the 16- nation currency as the Bank of England prepared to print money to buy assets as part of a quantitative easing policy. “Investors are saying we don’t like the banking situation in the U.K., the housing data was bad, and we’re nervous about the economy,” said Jeremy Stretch, a senior currency strategist in London at Rabobank International. “Quantitative easing is about to begin, and all these factors tell us to stand aside and wait until it gets cheaper.” The GBP/USD is currently trading $1.3730 as of 9:05am, GMT.

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