LONDON, Aug 16 – News of a Japanese economic slowdown boosted the safe-haven yen on Monday amid deep concern over the global economic recovery, while the euro nudged higher against the dollar.
In late morning deals here, the dollar sank to 85.74 yen, from 86.28 yen late in New York on Friday. It had struck a 15-year low at 84.73 yen last Wednesday after the US Federal Reserve downgraded its economic outlook.
Elsewhere on Monday, the European single currency rose to 1.2812 dollars, up from 1.2750 in New York late Friday.
Global recovery fears were stoked by Japan\’s weaker-than-expected gross domestic product (GDP) figures, as the nation reported that its economy grew at the slowest pace in three quarters during April-June.
"The immediate market reaction to soft Japanese GDP data was to sell risk," said Adam Cole, global head of foreign exchange strategy at RBC Capital Markets in London.
Japan\’s GDP increased by an annualised 0.4 percent in the second quarter, but sharply missed forecast 2.3 percent annualised growth, according to economists polled by Dow Jones Newswires.
On a quarterly basis, growth was at 0.1 percent, down from a revised 1.1 percent in the previous quarter.
"The yen has strengthened following the weaker-than-expected second-quarter GDP report from Japan, which has further eroded investor confidence in the global economic recovery, boosting safe-haven demand for the yen," said economist Lee Hardman at The Bank of Tokyo-Mitsubishi UFJ.
"The sharp slowdown in economic activity was driven mainly by fading support from fiscal stimulus as both private consumption and public spending faltered in the second quarter."
Some dealers fear the dollar could continue to slide below its all-time-low of 79.75 yen as investors also focus on uncertain US economic growth.
Investors were watching closely for possible intervention moves by Japanese authorities, with local media reporting that Prime Minister Naoto Kan and Bank of Japan governor Masaaki Shirakawa would meet this week to discuss the recent yen strength.
"The market consensus is that the Bank of Japan (BOJ) will ease monetary policy in the near term," said Tsuyoshi Kawata, senior strategist at Nikko Cordial Securities.
In late London trade, the euro changed hands at 1.2812 dollars against 1.2750 dollars on Friday, at 109.85 yen (109.95), 0.8219 pounds (0.8180) and 1.3334 Swiss francs (1.3404).
The dollar stood at 85.74 yen (86.28) and 1.0408 Swiss francs (1.0514).
The pound was at 1.5588 dollars (1.5590).
On the London Bullion Market, the price of gold rose to 1,222.90 dollars an ounce from 1,214.25 dollars an ounce on Friday.