Asian session: The yen weakened

01:45 China HSBC Manufacturing PMI (preliminary) January 51.5 51.9

The yen weakened as signs of strengthening manufacturing in China damped demand for the relative safety of Japan’s currency, while North Korea’s threat to test nuclear weapons sapped appetite for the region’s assets. North Korea threatened to conduct a nuclear weapons test “targeted” at the U.S. after the Obama administration pushed through new United Nations sanctions against the totalitarian state for last month’s rocket launch. The yen slid versus all of its 16 major counterparts after a private report showed factory output in China, the world’s second-biggest economy, is expanding at the fastest pace in two years. HSBC Holdings Plc and Markit Economics said today the preliminary reading of China’s Purchasing Managers’ Index rose to 51.9 in January from the 51.5 final reading for December and the 51.7 median estimate of analysts surveyed by Bloomberg News. Japan today posted a bigger-than-estimated trade deficit and data tomorrow may show consumer prices fell the most since August. Japanese imports exceeded exports by 641.5 billion yen ($7.2 billion) last month, compared to a 954.8 billion yen gap in November, the Ministry of Finance said today. The median estimate of economists surveyed by Bloomberg News was for a 522.8 billion yen shortfall. Exports in December dropped by more than forecast, and the annual trade deficit was a record 6.93 trillion yen, the data showed.

The euro failed to rally after the International Monetary Fund cut global growth forecasts and projected a second year of contraction in the currency bloc. The world economy will expand 3.5 percent this year, less than the 3.6 percent forecast in October, the Washington-based IMF said yesterday in an update of its World Economic Outlook report. It expects the 17-country euro area to shrink 0.2 percent in 2013, instead of growing 0.2 percent as forecast in October.

EUR/USD: during the Asian session, the pair traded in the range of $1.3295-25.

GBP/USD: during the Asian session the pair fell to $1.5810.

USD/JPY: during the Asian session, the pair rose to Y89.30.