Pound To Dollar Exchange Rate Plummets As Japanese Factory Output Slows

Published: Thursday, 31 May 2012 09:00 BST - Written by Tim Boyer

STORY LINK Pound To Dollar Exchange Rate Plummets As Japanese Factory Output Slows

Last night’s Asian session saw an entrenchment of the ‘risk-off’ trading environment which Europe’s markets experienced yesterday. This saw Hong Kong’s Hang Seng index lose almost 1% of its value, while the combined market capitalisation of Tokyo’s Nikkei 225 dipped by 1.63% . The shift out of equities and into safe haven assets had begun the previous day, as market participants became increasingly uneasy about the interest rates which Spain was being forced to pay in order to service its national debt. With yields on Spain’s 10-year gilts edging towards 7%, market babble suggests that the Iberian giant could be ‘the next Greece’.

The downbeat mood amongst investors was augmented last night with the release of highly disappointing Japanese Industrial Production figures for April, which showed that factory output had increased by a tiny 0.2% compared with the month before. Analysts had been anticipating a monthly increase of 0.5%, following the March’s healthy uptick of 1.3%; the numbers suggest that having shown signs, in recent times, of having weathered the catastrophic tsunami of last year, the Japanese economy is beginning to succumb to the slowdown which the global economy appears to be heading towards.

The major feature of the last 24 hours in the currency markets has been the heavy and sustained support for the safe-haven US Dollar, which has seen the GBP USD exchange rate dip into the 1.54s during the overnight session. Cable had been trading close to 1.6300 on the first trading day of t his month – the steady move downwards which has ensued in the intervening period gives an indication of the fear levels amongst investors regarding the eurozone’s ongoing debt crisis and the threat of a reduction in the levels of worldwide economic activity which it brings.

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