US Markets

Yen near 1-month highs vs dollar on risk aversion

Credit: REUTERS/THOMAS WHITE

The Japanese yen held near a one-month high against the dollar on Thursday as concerns of a weakening U.S. economy spurred hedge funds to pare long positions on the greenback.

By Saikat Chatterjee

LONDON, Oct 3 (Reuters) - The Japanese yen held near a one-month high against the dollar on Thursday as concerns of a weakening U.S. economy spurred hedge funds to pare long positions on the greenback.

Expectations that the U.S. economy would continue to outperform other major economies and put pressure on the U.S. central bank to slow its rate cutting cycle took a hit this week after weak manufacturing surveys.

Tuesday presented a dire picture of U.S. manufacturing with the Institute for Supply Management reading falling to its lowest level in more than 10 years.

Investors now await the ISM services report later in the day and Friday's employment report to confirm or quell recession worries.

"Risk aversion is broadly on the rise and that has been triggered by the weakness in manufacturing ISM data earlier this week," said Manuel Oliveri, an FX strategist at Credit Agricole in London.

Against the Japanese yen JPY=EBS, the dollar held just above a one-month low at 106.97 yen, down 1.4% from a high of 108.44 yen hit earlier this week.

The dollar has broadly gained in recent weeks as investors have added long positions on expectations that other major economies led by Europe will underperform the United States.

Latest futures data show long dollar bets at a 3-month high.

"It seems like there's been a bit of a sea change in market sentiment," said Nick Twidale co-founder of Sydney-based trade finance provider Xchainge, though adding that the United States still looked in better shape than Europe.

"I think overall (the dollar) will remain grinding higher while there's still a disparity between the U.S. economy and the rest of the world."

The pound GBP=D3 was steady at $1.2289 after British Prime Minister Boris Johnson proposed an all-island regulatory zone in Ireland in his final pitch for a Brexit deal before the end of the month.

(Reporting by Saikat Chatterjee; Additional reporting by Tom Westbrook in SYDNEY; Editing by Peter Graff)

((saikat.chatterjee@thomsonreuters.com; +44-20-7542-1713; Reuters Messaging: saikat.chatterjee.reuters.com@reuters.net))

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