The Yen and Franc Rise as US Manufacturing Slumps
The Japanese yen and Swiss franc strengthened against the US dollar on Friday, reaching multi-month highs, as concerns about a potential US economic downturn grew. This followed an unexpected decline in US manufacturing activity, which triggered a sell-off in stocks and a drop in bond yields.
The safe-haven appeal of the yen and franc attracted investors seeking refuge from market volatility. The yen reached 148.51 per dollar overnight, its highest level since mid-March, and traded around 0.2% stronger at 149.085 per dollar on Friday. The franc also climbed to its highest level since early February, reaching 0.8726 per dollar.
Meanwhile, the risk-sensitive Australian dollar weakened, extending its losses from the previous session. The Australian dollar fell 0.14% to $0.6493 on Friday, following a 0.52% decline on Thursday.
The slump in US manufacturing activity fueled fears of a "hard landing" for the US economy. This led to a sell-off in US stocks, with the tech-heavy Nasdaq Composite Index falling by 4.1%. The broader S&P 500 Index also declined by 3.3%.
The US economic outlook faces a crucial test later on Friday with the release of monthly payroll figures. A weak result could intensify concerns about a hard landing and increase calls for a 50-basis-point rate cut by the Federal Reserve in September.
The Bank of England also made a decision on interest rates on Thursday, opting for a cautious approach with a quarter-point reduction to 5%. The British pound weakened slightly against the US dollar, falling 0.09% to $1.2723.
The euro also declined against the US dollar, reaching a three-week low of $1.07775 overnight. It traded around 0.07% lower at $1.07845 on Friday.