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Dollar in lower 104 yen on weak China data, euro up on positive PMI

January 23, 2014

TOKYO , Jan. 23 -- ( Kyodo ) _ The U.S. dollar slumped into the lower 104 yen zone during Tokyo trading on Thursday, erasing its gains in the morning after disappointing manufacturing data from China dampened market sentiment. At 5 p.m. , the dollar fetched 104.34-35 yen compared with 104.48-58 yen in New York and 104.36-38 yen in Tokyo at 5 p.m. Wednesday . It moved between 104.21 yen and 104.84 yen during the day, changing hands most frequently at 104.64 yen . The euro was quoted at $1.3588-3589 and 141.78-82 yen against $1.3542-3552 and 141.53-63 yen in New York and $1.3544-3546 and 141.35-39 yen in Tokyo late Wednesday afternoon. The primary reason HSBC's China Flash Manufacturing Purchasing Managers' Index for January triggered such a slide in the dollar was its timing, said Yuji Saito , director of foreign exchange at Credit Agricole Corporate & Investment Bank in Tokyo . The index fell to 49.6 in January, dropping below the 50 line that separates expansion of activity from contraction, for the first time in six months. "With the Lunar New Year beginning next week, there was a wave of position unwinding, and the combination of these two factors drove the dollar down," Saito said. The dollar had climbed into the upper 104 yen zone in the morning on the back of Prime Minister Shinzo Abe's speech overnight at the World Economic Forum in Davos, Switzerland . "Abe's pledge to cut corporate tax bolstered market sentiment in the morning, so today could have provided the dollar with a chance to top 105 yen for the first time since its fallback due to the last round of U.S. nonfarm payrolls earlier this month," Saito said. Market participants who bought back the dollar in the morning "then found themselves forced to sell the U.S. currency again in the afternoon," he said. With GDP growth and other Chinese indicators largely in line with expectations, the influence of the latest PMI figures is unlikely to linger for long, but the dollar should remain in the 104 yen range at least until next week's U.S. Federal Open Market Committee meeting, Saito said. Although the dollar is unlikely to move dramatically against the yen ahead of the FOMC meeting, the longer term trend in the dollar-yen pair looks solid, said Shinichiro Kadota , foreign exchange strategist at Barclays Bank . The euro climbed sharply against the dollar and the yen in late Tokyo trading after the release of better-than-expected French business activity data for January.

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Source: Japan Economic Newswire

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