Investors turned to safe-haven currencies like the Japanese yen and Swiss franc as concerns about the US economy and tech sector valuations triggered a sharp selloff in Wall Street. The catalyst for the selloff was soft US manufacturing data, leading to worries about a hard landing for the US economy. This, coupled with nervousness ahead of the monthly payrolls data, caused a risk-off mood in the markets, impacting Asia and Europe.
The yen strengthened against the dollar, reaching as high as 144.89 per dollar before trading at 145.195 as of 0902 GMT, following a 1 per cent rally overnight. The focus is on US jobs data, with traders increasing the chances of a 50-basis point Federal Reserve interest rate cut this month. Economists expect an increase of 165,000 US jobs in August, up from 114,000 in July. Investors are also closely monitoring job openings data and jobless claims ahead of the release.
The Swiss franc, another safe-haven currency, also strengthened against the dollar. The euro remained flat, recovering from marginal declines earlier in the session. Euro zone business activity received a boost from hosting the Olympic Games in France, but the survey suggests that the bloc’s malaise is likely to return post the Paralympics as demand remains weak. Sterling was also flat, while the Aussie continued to weaken, extending the previous day’s tumble.
Cryptocurrencies like bitcoin and ether also faltered, with both slipping about 2.4 per cent. Overall, the risk-off sentiment in the market is driving investors towards safe-haven currencies and assets as uncertainties around the US economy and tech sector valuations persist. Traders are closely monitoring US job data and Fed interest rate decisions to gauge the future trajectory of the markets. The market volatility is expected to continue until there is more clarity on these key economic indicators.
