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Dollar And Yen Rise On Risk Aversion

The U.S. dollar and the Japanese yen surged higher against their major counterparts on Monday as political uncertainty in France and some weak economic reports prompted traders to sell higher-yielding assets and bet on safe havens.

In the first round of the French Presidential Elections on Sunday, Socialist leader Francois Hollande won the most number of votes, pushing incumbent Nicolas Sarkozy to the second place, estimates show. Hollande and Conservative President Sarkozy will now go into a second run-off vote on 6th May.

In economic news, China's manufacturing activity shrank for a sixth consecutive month in April, but the pace of decline eased from a month earlier owing to slower contraction in output, new orders and employment, a key survey revealed today. The HSBC/Markit purchasing managers' index rose to 49.1 in April from 48.3 in March, with the reading below 50 still indicating a contraction in activity.

Meanwhile, flash estimates published by Markit Economics showed that the Eurozone private sector activity declined further to a 5-month low in April.

The composite output index dropped unexpectedly to 47.4 in April from 49.1 in March. Economists were forecasting the reading to rise to 49.3.

The services Purchasing Managers' Index fell to 47.9 from 49.2 in March. Likewise, the manufacturing PMI came in at 46.0, down from 47.7 in the prior month. The services PMI was seen rising to 49.3 and the manufacturing indicator to 48.1.

The dollar rose to as high as 1.3136 against the euro, 0.9151 against the franc and 1.6081 against the pound, compared to Friday's close of 1.3221, 0.9090 and 1.6143, respectively. The next upside target level for the dollar is seen at 1.310 against the euro, 0.920 against the franc and 1.606 against the pound.

The US dollar that closed last week's trading at 0.9924 against the Canadian dollar climbed to a 6-day high of 0.9970. On the upside, 1.002 is seen as the next target level for the US dollar.

Against the New Zealand dollar, the U.S. dollar jumped to a 1-month high of 0.8114. The next upside target level for the greenback is seen at 0.810. At Friday's close, the kiwi-greenback pair was quoted at 0.8185.

The U.S. dollar edged up to a 12-day high of 1.0295 against the Australian dollar, compared to 1.0379 hit late New York Friday. If the greenback advances further, it may target the 1.025 level.

The Japanese yen also gained, hitting 5-day highs of 80.98 against the US dollar and 106.38 against the euro. The next upside target level for the yen is seen at 105.5 against the euro and 80.6 against the dollar. The dollar-yen and the euro-yen pairs were worth 81.50 and 107.74, respectively at Friday's close.

Against the Swiss franc, the yen strengthened to a 5-day high of 88.55 with 88.0 seen as the next upside target level. At last week's close, the franc-yen pair was quoted at 89.70.

The yen surged up to a 4-day high of 130.24 against the pound and if the yen rises further, it may target the 129.5 level. The pound-yen pair was worth 131.55 at last week's close.

The yen that closed Friday's trading at 82.15 against the Canadian dollar strengthened to a 6-day high of 81.26. On the upside, 80.5 is seen as the next target level for the Japanese currency.

Against the Australian dollar, the yen edged up to a 6-day high of 83.41, compared to 84.59 hit late New York Friday. The next upside target level for the yen is seen at 83.0.

The aussie fell as the nation's producer prices fell unexpectedly in the first quarter.

Latest figures from the Australian Bureau of Statistics showed that the producer price index fell 0.3 percent quarter-on-quarter in the March quarter compared to expectations of a 0.5 percent increase. This marked the first decline since the December quarter of 2009. In the December quarter of 2011, the PPI rose 0.3 percent.

Annually, the index rose 1.4 percent, slower than forecast of a 2.2 percent rise. This followed a 2.9 percent annual increase in the December quarter.

The yen that slipped to a 4-day low of 66.85 against the New Zealand dollar in early Asian deals at 7:55 pm ET rebounded thereafter. As of now, the yen is trading at a 6-day high of 65.73 against the kiwi, compared to Friday's close of 66.71. If the yen climbs further, it may target the 65.3 level.

Looking ahead, Canada's wholesale sales for February is expected at 8:30 am ET.

by RTTNews Staff Writer

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