LONDON, July 8 — Safe-haven demand lifted the yen and the US dollar today after former Japanese prime minister Shinzo Abe was shot while campaigning for a parliamentary election.
The euro, at a 20-year low, was falling towards parity against the dollar and set for its worst week in four months as Europe braced to tip into recession, while markets awaited US jobs data.
Abe was shot today in the western city of Nara, with Prime Minister Fumio Kishida saying Abe was in a grave condition.
The yen rose as much as 0.5 per cent immediately after the news. At 0810 GMT, it was up 0.2 per cent at 135.81 per dollar.
“I think the yen is just playing its safe-haven role,” said Bart Wakabayashi, branch manager at State Street in Tokyo.
“FX market players (are) pretty much ingrained in the way they trade,” he said, instinctively buying dollars and yen on bad news.
The euro is down 3.2 per cent against the dollar this week as investors worry that an energy crisis brought on by the uncertainty of gas supply from Russia could tip the continent into recession.
The single currency fell 0.6 per cent to US$1.01005 (RM4.43) against the dollar after hitting a fresh two-decade trough of US$1.00720. Its declines helped to lifted the US dollar index to two-decade highs. Today, the dollar rose 0.5 per cent against a basket of currencies to 107.560.
“Rising EU gas prices and signs of energy rationing in Germany underline existential risks for the euro zone economy,” said Jeremy Stretch, head of G10 FX strategy at CIBC, adding that a euro slide to parity “looks increasingly likely”.
Sterling was set for a second consecutive weekly declines, but traders said its 1.8 per cent fall this week was relatively modest amid British political chaos with Prime Minister Boris Johnson quitting. The pound was down 0.65 per cent on the day to US$1.1948.
While surging energy prices look to take the wind out of confidence and growth in Europe, investors have also been worried about the US economy, even though the most recent data has been better than expectations.
US non-farm payrolls figures are the next indicator, due at 1230 GMT, with economists forecasting some 268,000 jobs were added in June.
A stronger figure could allay some recession worries, but would probably add to rate hike bets and could lift the dollar.
“Stronger payrolls gains would underpin expectations for an ever more aggressive Fed policy stance,” said Commonwealth Bank of Australia strategist Carol Kong in Sydney.
Two of the Federal Reserve’s most vocal hawks yesterday said they would support another 75 basis-point interest rate increase later this month but a downshift to a slower pace afterward.
The dollar has also been standing tall in emerging markets, driving several Asian currencies to multi-year lows this week and India’s rupee to a record trough.
Bitcoin has mounted a semblance of a recovery, meanwhile, gaining nearly 13.5 per cent on the week to US$21,800. — Reuters
