There were fresh fears surrounding risk appetite during the weekend as Ukraine concerns dominated and this provided some fresh defensive demand for the Japanese yen with gains at the Asian open. There were reports that Russian forces had control of the Crimea region which increased diplomatic tensions and fears over wider military confrontation.
As the Nikkei and regional equity markets came under pressure, USD/JPY was trapped below the 101.50 level. Equity-market selling pressure was contained which averted more substantial moves in risk assets with the Australian dollar resilient. Similarly, although EUR/USD also gapped lower at the Asian open, it found support above the 1.3750 level.
The latest Chinese PMI data was broadly in line with expectations at 50.2 for February which offered no significant support for risk conditions, but there was some relief over a significant monthly gain for the non-manufacturing sector.
The latest UK manufacturing PMI data was broadly in line with expectations at 56.9 for February from a revised figure of 56.6 for January. There had been some speculation over a weak figure into the release as GBP/USD dipped to the 1.67 level and relief over the actual data triggered a recovery back towards 1.6730. The mortgage approvals data was also robust while lending data was slightly disappointing with another decline in business lending undermining medium-term confidence.
There were no surprises in the early US data releases with a restrained increase in the core PCE deflator while personal income and spending figures were marginally above expectations.
The Russian central bank intervened aggressively to sell dollars and avert more substantial rouble losses. A rebalancing of reserves helped put some downward pressure on EUR/USD, but the pair again held above the 1.3750 level and moved higher into US trading.
The latest US Markit PMI manufacturing-sector release recorded an upward revision to 57.1 from a flash 56.7, the highest reading since May 2010. The national US ISM manufacturing index registered a monthly improvement to 53.2 from 51.3 previously which also helped ease immediate market concerns. EUR/USD retreated once again to test support around 1.3750 as GBP/USD was subjected to another test of the 1.67 area.