The Japanese yen did not maintain its blistering pace of decline last week but it did edge lower until Friday, when investors reassessed their expectation of aggressive monetary policy easing by the Bank of Japan.
This Monday morning the yen shot higher in early trade after China announced weaker than expected figures for economic growth and industrial production in the first quarter of the year. The 1.6 per cent by which gross domestic product (GDP) expanded in Q1 and the 7.7 per cent growth in the year to March would have delighted any western country but to China they were a disappointment.
Investors reacted by running for cover, selling the currencies of commodity-exporting countries (if China's expansion is slowing it will need less raw materials) and buying the safe-haven Japanese yen - the bunker mentality. It was the first real excitement that the FX market had encountered in more than a week. The paucity of tradable economic statistics, the absence of any new Euroland crises and the failure of Kim Jong Un to fire his rocket had left investors bereft of inspiration. Daily ranges were narrow and net movements small.
Sterling did not do well but it fared no worse than the US and Canadian dollars. The pound got a helpful break when the National Institute for Economic and Social Research published its estimate that Britain's GDP grew by 0.1 per cent in the first quarter. If confirmed by the Office for National Statistics it will dispel fears of a triple-dip recession.
Quarterly growth of 0.1 per cent might not look terribly impressive after a -0.3 per cent contraction in the previous three months, but investors get almost as emotional about GDP figures as do the politicians and the media. There was palpable relief that the number was not negative.
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