Yen tumbles due to Japanese official's comments
The Japanese yen tanked sharply on Friday as Japan Deputy Economic Minister Nishimura said the decline of yen is not over and it is no problem with the dollar hitting 100 yen. The single currency was supported as better-than-expected Germany PMI data showed the worst situation of the euro zone debt crisis may have gone.
Versus the Japanese yen, although the greenback initially dipped to 88.42 in Asian morning, the pair jumped to 89.32 after the Japan's 20-year JGB auction. The pair continued to move higher due to the yen-bearish comments from Japan Deputy Economic Minister Nishimura, who said in an interview that 'BoJ needs to ease more to reach 2% inflation; yen at 100 per dollar is no problem; yen a 110-120 per dollar adds import costs.' The dollar eventually rallied to a fresh 30-month high of 90.56 near New York close due the strong rise in eur/jpy before easing.
Japan sold the 20-year JGB at lowest accepted price at 99.05 (yield of 1.7640%) and average accepted price at 99.25 (yield of 1.7500%). The bid-to-cover ratio is 3.05 and bids accepted at lowest price is 43.1455%.
Despite euro's initial rise fm Asian low at 1.3297 to 1.3347 in European morning on active cross buying of euro vs yen, price fell sharply to an intra-day low at 1.3286 due to the weak France manufacturing and services PMI (42.9 and 43.6, versus the forecasts of 45.1 and 45.6). However, the rally in eur/jpy pushed the pair above said 1.3347 in New York morning and price eventually climbed to 1.3393 at New York midday after the supportive comments from German Foreign Minster Guido Westerwelle who said 'euro zone crisis now past lowest point, but cannot relax in our efforts.'
Earlier in European morning, the single currency was supported due to the solid Germany service and manufacturing PMI, which came in at 48.8 and 55.3, better than the forecasts of 46.8 and 48.8. Eurozone service and manufacturing PMI were released at 48.3 and 47.5, compared to the forecasts of 48.0 and 46.5 respectively.
The British pound edged higher from Asian low at 1.5813 to 1.5852 in European morning. However, active cross selling of sterling versus euro pressured the pair below Wednesday's low at 1.5802, price hit a 5-month low at 1.5757 in New York morning before staging a recovery to 1.5796.
In other news, Germay's Chancellor Merkel said 'euro zone doesn't need emergency treatment, but long-term solutions; need to ensure social/political instability in Europe doesn't escalate; pushing through painful reforms easier during time of crisis, must act now; Europe must find way to raise its competitiveness in global market; too early to give all clear in euro zone crisis; "no worried" about currency manipulation risk, not without concern when looking at Japan.'
On the data front, U.S. jobless claims came in at 330K, versus the forecast of 355K and 335K in the previous reading.
Data to be released on Friday:
Japan National CPI, Tokyo CPI, Germany Ifo business climate, Ifo current assessment, U.K. GDP, Canada CPI, CPI core, U.S. New home sales.