Forex - Yen weakens after Tankan survey, Aussie down on manufacturing

Investing.com - The Japanese yen weakened on Wednesday after a survey showed a mixed outlook for Japan's economy.

The Bank of Japan on Wednesday released its quarterly Tankan business survey for September, showing depreciation of the yen supports the Tokyo stock market, but that higher costs are also hitting household spending.

The September Tankan showed that sentiment among major manufacturers rose to plus 13 in September from plus 12 in June, showing that negative effects of weak exports and domestic demand were offset by the yen's drop and strong Nikkei stocks. The DI is expected to be flat at plus 13 in December.

The BoJ is expected to maintain the pace of its asset purchases at its next policy meeting on Oct. 6-7, expecting the economy to continue to recover moderately.

USD/JPY traded at 109.77, up 0.11%, while AUD/USD fell to 0.8723, down 0.30% after the latest China manufacturing data and a domestic one. EUR/USD traded at 1.2618, down 0.09%.

Australia's AI Group's September manufacturing index fell 0.8 point to 46.5. Ahead is the 1130 (0130 GMT) release of August retail sales, expected up 0.4%.

China starts a week-long holiday to mark National Day and markets will reopen day next Wednesday.

The CFLP PMI came in at 51.1, above an expected 51.0, and even with August's 51.1.

Hong Kong markets are closed Wednesday and Thursday.

Overnight, the dollar traded higher against most major currencies as investors took up fresh positions assuming the Federal Reserve will close its bond-buying program in October and hike rates in 2015.

Expectations for U.S. monetary policy to grow less accommodative at a time when others may move to loosen bolstered the greenback on the last day of the third quarter.

The Federal Reserve will hold its next monetary policy meeting at the end of October, and markets expect the U.S. central bank to end its monthly bond-buying program then, which should open the door to tighter policy down the road.

Expectations for Europe and Japan to keep policy loose also boosted the greenback.

Eurostat, the statistics arm of the European Union, reported earlier that the euro area's annual inflation rate fell to a five-year low of 0.3% in September from 0.4% in August.

Core inflation, which strips out food, energy, alcohol and tobacco costs, came in at 0.7%, down from 0.9% in August.

Slumping consumer prices fueled market expectations for the European Central Bank to implement fresh stimulus measures to stave off the threat of deflation in the region after the bank unexpectedly cut rates to record lows last month.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.08% to 86.10.

On Wednesday, the U.S. is to release the ADP report on private sector job creation, which leads the government’s non-farm payrolls report by two days. Later in the session, the Institute of Supply Management is to release a report on manufacturing activity.

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