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Forex - Euro hits 3-month high against broadly weaker yen

Published 02/22/2012, 09:05 AM
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Investing.com - The euro rallied to a three-month high against the broadly weaker yen on Wednesday, after last week’s decision by the Bank of Japan to implement further easing measures and following a deal on a second bailout for Greece.

EUR/JPY hit 106.33 during European afternoon trade, the pair’s highest since November 14; the pair subsequently consolidated at 106.25, climbing 0.69%.

The pair was likely to find support at 105.03, the low of February 21 and resistance at 107.44, the high of October 14.

A senior official at Japan's Ministry of Finance said earlier that the yen's weakening was due to last week's decision by the Bank of Japan to increase the size of its asset-purchase program to JPY30 trillion. He added that the government will continue to monitor currency moves and respond as appropriate.

Earlier this week, official data showed that Japan posted a record trade deficit in January, fanning concerns that the strong yen is having a negative impact on the country’s largely export driven economy.

Furthermore, ratings agency Standard & Poor's said Monday that the outlook on Japan's AA- sovereign credit rating remained negative and warned that it expected Japan's fiscal flexibility "to continue to diminish."

Meanwhile, the euro remained under pressure amid uncertainty over whether Greece can follow through with fiscal reforms after euro zone finance ministers signed off on a EUR130 billion rescue package on Tuesday.

Earlier in the day, preliminary data showed that manufacturing activity in the euro zone improved less-than-expected in February, remaining in contraction territory for the seventh consecutive month, while service sector activity in the euro zone unexpectedly contracted.

A separate report showed that new industrial orders across the euro zone increased by 1.8% in December, erasing the previous month’s 1.1% drop.

The yen was also sharply lower against the U.S. dollar with USD/JPY rising 0.64%, to hit 80.25.

Later Wednesday, the U.S. was to publish industry data on existing home sales.


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