The big loser from the Asian session was the Japanese yen, dropping to fresh four-year lows against the US dollar following data suggesting that Japanese investors are now looking abroad, deterred from holding the yen by the Bank of Japan’s aggressive monetary easing. The yen was already under pressure from the greenback, breaking to the wrong side of a key physiological level with the US currency flying high in response to more encouraging news on the US jobs market. The greenback also blew past its other counterparts, mainly the Euro, Swiss Franc and the Australian dollar.
The euro also lost out; however, the single currency may find support from German trade figures released, which added to signs of an economic recovery in Europe’s key economy.
Although weaker against the US dollar, sterling has found support from solid UK industrial and manufacturing output figures and the Bank of England’s decision not to add to its quantitative easing total.
Sterling
Sterling found dual support from solid UK industrial and manufacturing data, and news that the Bank of England made no changes to policy, leaving both its 0.5 per cent base rate and its £375 billion interest rate lowering bond-buying programme untouched. Investors will now look ahead to next week’s BoE Quarterly Inflation Report and the May 22 release of the meeting minutes for clues on the outlook for UK monetary policy.
US dollar
The US dollar flew sky-high against its rivals, getting a strong lift in the wake of more favourable news on the US jobs market. The US currency also shot above a key resistance point against the yen on the way to rallying to April 2009 highs, a move further supported by data from Japan. The greenback also blew past its other counterparts, touching two- and five-week highs against the euro and Swiss franc, and its strongest in nearly 10-and-a-half months against the Australian dollar.
Euro
The euro drifted lower as investors cashed in on recent gains that have come from a spate of better factory data from Germany, the backbone of the eurozone economy. The euro has struggled somewhat for direction after the European Central Bank said it stood ready to ease policy further with the broader euro economy still languishing in recession. Keys to the outlook for ECB policy are seen mostly in the hands of the bloc’s core nations. Continued signs of fragility would renew pressure the euro and strengthen the odds of more central bank action, although recent data from Germany showed growth in exports from the country.