SYDNEY, Nov 22: The yen fell to a fresh four-year low against the euro early in Asia on Friday, left exposed after promising data in both Germany and the United States underpinned the single currency and the U.S. Dollar.
Investors also dumped the Australian dollar after the country’s central bank chief said he was ‘open-minded’ about intervening to weaken the currency.
The euro climbed as far as 136.45 yen, reaching highs not seen since October 2009, while the U.S. Dollar scaled a four-month peak of 101.19 yen.
There was little reason for investors not to continue using the yen as a funding currency for carry trades after the Bank of Japan stayed committed to its ultra-loose monetary policy on Thursday.
Against the dollar, the euro bounced to $1.3477 from a one-week low of $1.3399. That saw the dollar index dip to 80.965, recoiling from a 1-1/2 week high of 81.290.
Aiding the euro, ECB President Mario Draghi shot down a media report that said the central bank was actively considering cutting a key interest rate below zero.
A survey showing Germany’s private sector grew faster in November helped offset disappointing outcomes elsewhere, particularly a tumble in French business activity.
U.S. Data were also encouraging, although they were not strong enough to change market expectations that the Federal Reserve will scale back stimulus early next year.
Factory output rebounded this month, while the number of Americans filing new claims for jobless benefits fell sharply last week.
BNP Paribas analysts said they remained reluctant to chase any strength in the U.S. Dollar, noting that front-end Treasury yields remained anchored despite the recent move higher in long-end yields.
‘Moreover, we expect U.S. Data over the next few weeks to be too inconclusive to support the incipient rebuilding of December tapering hopes,’ they added.
‘With Fed expectations in flux we prefer to avoid direct USD exposure now, focusing instead on short EUR and short JPY cross trades.’
Another standout mover was the Australian dollar, which suffered heavy falls after Reserve Bank of Australia Governor Glenn Stevens stepped up his rhetoric against the currency, which he has long argued was overvalued when judged against economic fundamentals.
While Stevens made clear that intervention was not without risks, markets were in the mood to sell the Aussie especially after a closely watched report showed China’s factory sector grew at a slower pace in November.
The Aussie skidded to a 2-1/2 month low of $0.9198 before edging back up to $0.9230. The euro soared to a 2-1/2 month high of A$1.4621, breaking above key resistance levels that could pave the way for a retest of the August high of A$1.5029.
There is little in the way of major economic data out of Asia on Friday. In Europe, the focus will be on the Ifo think tank’s German business climate index.
(agencies)
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