Forex – Dollar Drops; Japan and Australia Report Soft Data

© Reuters. The dollar gave up earlier gains against major currencies in morning trade in Asia Thursday –  The dollar gave up earlier gains against major currencies in morning trade in Asia Thursday as risk appetite improved after political turbulence in Italy appeared to calm down.

A political stalemate in Italy had scared markets who feared renewed discussions about the future of the euro. But a decision by the country’s two largest non-establishment parties to renew efforts to form a coalition appeared to stave off the need for fresh elections.

The dropped from a fresh high at 94.93 and was on course to trade below the 94 level. The index that tracks the greenback against a basket of six major currencies shed 0.08% to 94.00 at 11:30PM ET (03:30 GMT). The slide is poised to continue.

In Japan, the pair lost 0.17% to 108.73, edging back toward a five-week low it hit on Tuesday of 108.115.

Japan released the figures, which rose 0.3% in April from a month earlier, much lower than the expected 1.4% increase. Year-on-year figures rose 2.5%, also lower than the expected 3.6% hike. The worse-than-expected data hampered risk sentiment and, ironically, supported the safe-haven yen.

In China, the People’s Bank of China set the set the reference rate for the yuan against the dollar, the mid-point from which the currency is allowed to trade, at 6.4144 versus the previous day’s 6.4207. The pair gained 0.10% to trade at 6.4255.

China released stronger-than-expected manufacturing and services (PMI) data for May. The official manufacturers PMI released by the National Bureau of Statistics (NBS) came in at 51.9 versus the estimated 51.3. The services PMI rose to 54.9 in May from 54.8 in April. However, China’s Steel Industry PMI fell to 50.6 from 51.7.

The pair lost 0.25% to trade at 0.7557. As Australia’s largest trading partner, China’s economic performance normally serves as a directional driver for the sentiment-linked Aussie. However, the Aussie lost ground against the greenback despite bullish China data on Thursday morning.

Meanwhile, Australia also reported worse-than-expected Capex data. Private capital expenditures rose only 0.4% in the first quarter versus 1.0% estimated and 0.2% from the fourth quarter of last year.

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