Daily Morning Report 17.08.2015

The dollar edged higher against the other major currencies on Monday as investors remained wary in the wake of the yuan’s devaluation last week, while the yen shrugged off data showing a contraction in second quarter growth in Japan.

USD/JPY edged up 0.10% to 124.40.

Data on Monday showed that Japan’s gross domestic product contracted by 0.4% in the three months to June and was down 1.6% on a year-over-year basis.

The contraction was slightly smaller than forecast, but concerns over the outlook for third quarter growth supported expectations for more monetary easing from the Bank of Japan.

Meanwhile, EUR/USD eased to 1.1097.

The dollar remained supported after data on Friday showed that U.S. producer prices were higher for a third straight month in July, while factory output increased at the fastest rate in eight months.

The encouraging data bolstered the outlook for third quarter growth and underlined expectations for a rate hike by the Federal Reserve as early as next month.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 96.69.

Investors remained wary amid concerns that China could let the yuan fall further after last week’s unexpected devaluation.

Uncertainty over the impact of the devaluation on global inflation expectations and the outlook for growth in China have sparked fears that the Fed could keep short-term interest rates on hold for longer.

The Australian dollar was little changed at 0.7375.

The Aussie fell to six-year lows of 0.7214 last week after the yuan depreciation before recovering after China’s central bank said there was no basis for further depreciation in the currency, given China’s strong economic fundamentals.