NEW YORK (MarketWatch) — The U.S. dollar turned sharply lower against the yen Wednesday afternoon as a weaker-than-expected U.S. ISM reading led investors to sell U.S. stocks and buy Treasurys, pulling down yields.
The dollar-yen pair is especially sensitive to fluctuations in interest-rate differentials, with the dollar often declining alongside U.S. Treasury yields, according to Omer Esiner, chief currency market analyst at Commonwealth Foreign Exchange.
The 10-year Treasury note yield 10_YEAR, -0.08% which moves in the opposite direction as prices, skidded 10 basis points on the day to 2.3880%, its lowest level since the beginning of September.
The Institute for Supply Management’s manufacturing index dropped to 56.6% in September, from a three-month high of 59% in August. Economists were expecting a reading of 58.5%.
The ISM data was the second significant U.S. data release Wednesday, following Automatic Data Processing Inc.’s jobs data. The ADP data showed the U.S. added 213,000 private-sector jobs, in line with analysts’ expectations.
After briefly topping 110 yen for the first time in more than six years during the Asia trading day, the dollar fell to ¥108.92 USDJPY, +0.03% Wednesday, its lowest level since August. 26. It traded at ¥109.66 Tuesday.
The euro and the pound fell against the greenback after a series of dour European data highlighted the increasing divergence in economic growth between the U.S. and its G-10 rivals.
PMI data for Germany and the U.K. showed a steeper-than-expected decline in manufacturing in both countries in September, with Germany joining France in contraction. The U.K. number fell to 51.6, below the 52.7 expected by economists.
Australian retail sales increased by 0.1% in August, missing expectations of a gain of 0.4%. The lackluster data pushed the Australian dollar lower against the U.S. dollar. The aussie AUDUSD, -0.10% traded at 86.62 cents in the Asia trading day, its lowest level against the dollar since January.
But buyers stepped in, halting the decline just before the currency reached a fresh four-year low below 86.60 cents. It then pared losses, trading at 87.34 cents late Wednesday, compared to 87.43 cents Tuesday evening.