Dollar Weakens as Markets Crunch BOJ Move

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The U.S. dollar weakened against several major currencies on Monday, as markets digested the Bank of Japan’s surprise decision to adopt negative interest rates, while lingering concerns over bleak global economic growth persisted.

USD/JPY was up by 0.14% at 121.29.

The yen fell sharply on Friday following the Japanese central bank’s move to cut its deposit rate into negative levels. The decision was designed to arrest deflation as well as encourage commercial lenders to use excess reserves.  The BoJ also stated that further deeper rate cuts may occur in the future.

The Japanese currency remained lower lower on Monday despite data showing factory activity in China slowing down for 6 consecutive months with the Chinese manufacturing purchasing managers’ index sliding to 49.4 from 49.7 in December.

The contraction in China’s manufacturing sector aggravated further persistent worries over China’s economy, being the world’s 2nd largest economy and a major driver of global growth.

EUR/USD inched up by 0.27% at 1.0862.

The euro gained but was tempered by data indicating slowdown in the Euro zone’s manufacturing sector in January, fanning fears of deflation.

The euro zone manufacturing PMI slid to 52.3 last month, down 0.9 since December.

The greenback was likwise lower against the British and the Swiss currencies, with GBP/USD up 0.26% at 1.4280 and the USD/CHF falling by 0.13% to 1.0217.

The sterling gained after U.K. manufacturing PMI rose to a 90-day high of 52.9 from December’s 52.1.

Meanwhile, USD/CAD increased by 0.45% to 1.4045.

The Australian and New Zealand currencies both slipped on the first day of February, with the AUD/USD falling by 0.35% at 0.7064 and NZD/USD losing 0.32% of its value at 0.6463.

The U.S. dollar index, which indicates the American currency’s strength against a trade-weighted basket of six major currencies, dropped 0.14% at 99.45.

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