Investors are showing their preference for safe-haven currencies, with the Japanese yen and the US dollar holding firm as investors move away from riskier assets. The shift in sentiment comes after Wall Street stocks tumbled, marking the worst sell-off in nearly a month. Concerns were heightened by disappointing US manufacturing data, which raised concerns about a possible hard landing for the US economy.
The yen was up a modest 0.1% at 145.325 against the dollar in early Asian trade, benefiting from a 1% gain against a greenback that was generally stronger across the board. Meanwhile, the US dollar was steady at $1.1046 against the euro after rising 0.26% on Tuesday and was unchanged at $1.3111 against the pound after rising 0.23% on the day. The Australian dollar was also little changed at $0.67135 after falling 1.2% on Tuesday.
Traders are adjusting their expectations for the Federal Reserve’s interest rate decision on Sept. 18, with the probability of a 50 basis point rate cut now at 38% from 30% previously, according to the CME Group’s Fed Rate Monitor tool.
“Markets are nervous ahead of Friday’s all-important non-farm payrolls report… which most market participants acknowledge will be at least a significant factor in whether the Fed cuts by 25 or 50 percent,” said Gavin Friend, chief market strategist at National Australia Bank (OTC:NABZY).
The latest U.S. manufacturing data showed a slight improvement from an eight-month low in July, with employment in the sector showing gains. However, the overall trend suggests that factory activity remains weak.
Economists expect the nonfarm payrolls report to show 165,000 jobs added in August, which would be an increase from the 114,000 jobs added in July. In the run-up to this key report, market participants will also be closely watching Wednesday’s job openings data and Thursday’s jobless claims report.
