Friday’s report showing the world’s number one economy expanded just 1.2 percent in April-June poured water on speculation the Federal Reserve will lift interest rates before the year’s end.
It also came hours after the Bank of Japan disappointed investors by deciding against ramping up its stimulus programme.
The two events hammered the greenback, which ended Friday just above the 102 yen mark, well down from the levels around 106 yen touched the day before.
In early Asian trade, the dollar edged up slightly against the Japanese currency to 102.60, but lost ground against the South Korean won, Indonesia’s rupiah and Malaysian ringgit, which jumped 0.8 percent.
Forex traders’ attention will now turn to Tuesday’s speech from Japanese Prime Minister Shinzo Abe, in which he is expected to outline details of the government’s 28 trillion yen stimulus flagged last week.
“The very low amount of stimulus from the BoJ does leave the market clearly expecting significant move from Prime Minister Abe in his announcement,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“Overall, we remain concerned about the impact of tighter US policy, but that can easily be overwritten by a significant stimulus package from Japan tomorrow.”
Abe in focus
The likelihood of US interest rates remaining low supported Asia’s equity markets, however.
By the break Japan’s Nikkei was up 0.5 percent, having recovered from early losses fuelled by the strong yen, while Taipei, Manila and Singapore posted healthy gains.
Hong Kong rallied 1.2 percent, Sydney added 0.7 percent and Seoul was also 0.7 percent higher.
But Shanghai slumped 1.3 percent after official figures showed China’s purchasing managers’ index of manufacturing activity indicated the sector shrunk last month.
Last month was the first time official figures have shown the sector contracted since February, and missed economist’s expectations that it would flat-line from a survey by Bloomberg News.
The data is the latest bad news on the world’s number two economy, which is growing at its slowest rates in a quarter of a century.
“The economy is at the tipping point right now and there is a downward trend,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd in Hong Kong.
“The government seems to be concerned about bubbles now, so policies are trending tighter.”