The yen pared back gains against the dollar and the euro on Monday but demand for the safe-haven currency looked likely to remain supported as weak economic data out of China added to fears over the outlook for global economic growth.
USD/JPY was up 0.21% to 112.91, off overnight lows of 112.16.
Data on Tuesday showed that activity in China’s manufacturing sector contracted for the seventh straight month in February.
The official manufacturing purchasing managers’ index fell to 49.0 from January’s reading of 49.4, falling further below the 50 level that separates growth from contraction.
Economists had expected the index to tick down to 49.3.
The private sector Caixin manufacturing PMI was also weaker, falling to 48.0, from 48.4 in January, undershooting market expectations of 48.3.
The yen also pared back gains against the euro, with EUR/JPY easing up 0.28% to 122.89 after falling as low as 122.08 overnight, the lowest level since April 2013.
Demand for the yen was also underpinned after China’s latest monetary easing efforts under underwhelmed markets, adding to the view in markets that world central banks are running low on options to spur growth.
China’s central bank said Monday it was cutting the amount of cash that banks must hold as reserves in a bid to boost lending, the fifth such cut since February 2015.
The euro was at one-month lows against the dollar, with EUR/USD at 1.0864.
The single currency remained on the back foot after data on Monday showing that the euro area fell back into deflation in February cemented expectations for more easing by the European Central Bank at its upcoming meeting on March 10.
Meanwhile, the Australian dollar pushed higher, with AUD/USD rising 0.42% to 0.7171 after the Reserve Bank of Australia’s widely expected decision to hold interest rates at a record low 2%.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was steady at one-month highs of 98.37.