Forexpros – The euro fell against the yen on Wednesday after weaker-than-expected Chinese factory data sparked demand for the Japanese currency amid a risk-off trading session.
The euro was also lower in anticipation of the European Central Bank’s statement on monetary policy due out on Thursday.
In Asian trading on Wednesday, EUR/JPY hit 95.91, down 0.24%, up from a low of 95.71 and off a high of 96.10.
The pair sought to test support at 95.54, the low from July 30, and resistance at 96.28, the high from July 31.
The China Logistics Information Center reported Wednesday that its Chinese Manufacturing PMI rose to an annual rate of 50.10 in July from 50.20 in June.
Analysts had expected the figure to rise to 50.30 last month.
The numbers show that while Chinese factory output may be expanding, orders from the country’s manufacturing base slowed last month.
Meanwhile the European Central Bank is due to announce its latest decision on interest rates on Thursday, and doubts are growing that the ECB will take drastic actions to spur the economy, which sent investors racing to the yen as part of a wait-and-see strategy.
Many investors remain wary if the ECB will announce Federal Reserve-style quantitative easing measures as once hoped, opting instead for a round of sovereign bond purchases made with money already circulating in the European economy.
Under quantitative easing, the Fed expands its balance sheet to buy assets, often described as printing money out of thin air, which packs more of a punch by weakening the currency more.
The European Central Bank’s mandate requires it to keep a tighter lid on inflation, which makes the call for quantitative easing harder to make, while the Federal Reserve has more wiggle room to spur recovery since it adheres to a dual mandate of price stability and to foster optimal employment conditions.
Meanwhile European indicators met market expectations though they still painted a picture of an economy battling major headwinds, further fueling demand for the yen.
The eurozone’s consumer price index held steady at 2.4% in July, meeting expectations.
A separate report showed that the unemployment rate in the bloc rose to 11.2%, a new record high in July, also meeting expectations.
Germany’s unemployment rate remained steady at 6.8% in July, but Italy’s unemployment rate rose to 10.8% in June, the highest level since quarterly records started in 1999 and well above market calls for a 10.2% reading.
The euro, meanwhile, was down against the pound and down against the Canadian dollar, with EUR/GBP trading down 0.05% at 0.7845 and EUR/CAD down 0.11% and trading at 1.2331.
All eyes will focus on the European Central Bank and the Federal Reserve as well, which will release its latest decisions on interest rates later Wednesday.
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