Yen falls after world-beating quarter

London - After a quarter that saw the yen surge as a haven amid slumping commodity prices and concern that China’s economy was slowing, October began on a more positive note for higher-yielding currencies.

The yen fell versus most of its 16 major peers Thursday as signs of improvement in Chinese manufacturing damped demand for safety and a former Bank of Japan deputy governor said additional monetary stimulus is likely. 

Australia’s dollar gained alongside the currencies of commodity-producing nations as global stocks continued their recovery from a rout that wiped out about $10trn.

“People are a little happier today because of the data and you take what you can,” said Neil Mellor, a senior foreign- exchange strategist at Bank of New York Mellon in London. “Ultimately people are still uncertain as to where we stand with interest rates, where China and its economic outlook stands.”

The yen weakened 0.1% to ¥120.03/$ at 11:20 and was little changed at ¥134.01/€. The 19-member shared currency dropped 0.1% to $1.1165. Australia’s dollar strengthened 0.9% to 70.82 US cents, after touching a one-week high of 70.85.

The MSCI Asia Pacific Index of stocks rose 1.5%, extending Wednesday’s 2.3% gain. The Stoxx Europe 600 Index climbed 1.1%.

China’s official purchasing managers index rose to 49.8 last month, the National Bureau of Statistics said Thursday, compared with the median estimate in a Bloomberg survey for it to remain at the three-year low of 49.7 reached in August. Readings below 50 indicate contraction.

A private purchasing managers survey by Caixin Media and Markit Economics increased to 47.2 for September, from an initial reading of 47.0.

The BOJ probably will need to add stimulus as there is nothing driving inflation amid emerging signs that the Japanese economy has slipped back into recession, Kazumasa Iwata, a deputy governor from 2003 to 2008, said in an interview.

The yen gained 2.2% in the third quarter against the dollar, making it the best performer among 31 major currencies, as signs of slowing growth in China set off a rout in global equities. The euro advanced 0.3%, while the Aussie declined 8.9%.

“It’s a classic case of risk-based pattern,” said Kengo Suzuki, chief currency strategist at Mizuho Securities in Tokyo. “Right now, it’s developed-nation currencies versus emerging and commodities-linked ones which take their cues from stocks that either fuel or ease risk aversion.”