The JPY sank Wednesday to its lowest levels so far this year against the USD, EUR and GBP after Japan posted a trade deficit for the first time since 1980, while the euro slipped back below $1.30 against the buck in the absence of fresh news on Greek debt talks. The USD traded as high as Y78.24 in European trading hours from Y77.68 in late New York trade Tuesday, while the EUR rose to as high as Y101.88 and GBP traded above Y122.
The JPY had been trading at historically strong levels in previous weeks and was one of the best performers last year as investors sought shelter from the euro-zone crisis by piling into the yen. Recent yen weakness is more likely corrective than a trend reversal. Ahead of the Federal Reserve Open Market Committee’s interest rate decision at 1730 GMT, analysts noted that the dollar’s gains against the yen will probably be limited because of the Fed’s commitment to ultra-low rates until at least mid-2013. The rate decision will be followed by Ben Bernanke’s press briefing and for the first time ever, the Fed will provide detailed rate path projections to investors at 1915 GMT.
The euro was boosted by strong German business sentiment data in early European trade and even poked its head above $1.3050. But the currency was unable to hold those gains due to the continued uncertainty over Greek debt restructuring, with private-sector creditors meeting in Paris to determine the course ahead. Other data showed the U.K. economy contracted 0.2% in the last quarter of 2011. The pound sold off ahead of the release and hit the day’s low at $1.5537 against the dollar but clawed back some of the losses as relief set in that the print wasn’t even weaker. The Hungarian forint, meanwhile, hit a three-month high against the euro as investor sentiment toward the country continued to improve. The euro traded as low as HUF297.15, compared with HUF298.89 late Wednesday.
EasyForexNews Research Team