Europe’s debt crisis continued to take a toll on the Euro Friday, as it lodged at an 11-year low against the JPY and 1 cent away from its weakest level more than a year versus the USD on the final trading day of 2011.
Illiquid trading conditions that have characterized markets since late December persisted Friday. Yet traders remain fixated on events in the euro zone, where policymakers have yet to craft a solution to a dynamic that has driven Italy’s bond yields to dizzying heights, and driven flows out of the Euro.
From its 2011 peaks at Y123.33 and $1.4940, the common currency has plunged about 19%, and nearly 14% against the USD.
The JPY, traditionally a safe-harbor currency, has become an unlikely beneficiary of Europe’s debt problems despite Japan’s recession and disaster hit economy. Japanese authorities have fought relentlessly to keep a strong yen from damaging demand for the country’s exports, but nervous investors continue to use the currency as a refuge from fears of a European financial collapse.
Heavy selling of the EUR/JPY pair, which plunged below Y99.85 for the first time since December 2000, helped to drive the dollar to its lowest in more than a month against the Japanese unit, at Y76.90.
Still, Japan’s deep and liquid markets remain a draw for international capital, despite a debt burden that exceeds 100% of its gross domestic product.
EasyForexNews Research Team