Euro reaches five year high against the Japanese yen

Following data indicating that eurozone unemployment is decreasing, the value of the euro is crawling back up to as high as $1.3621 (trading at a five year high against the Japanese yen). 

The Eurozone unemployment rate hit a 20-month low to 12.1 in October.

Consumer price inflation increased 0.9 percent last month (ahead of predictions), easing the European Central Bank’s concerns about low inflation, which will put an interest rate cut on hold.

Camilla Sutton, chief currency strategist at Scotiabank in Toronto, said:

“Disinflationary pressures are still present; however there was no further deterioration, which will ease some of the pressure on the ECB.”

According to the head of currency research at Commerzbank in Frankfurt, Ulrich Leuchtmann, the euro is expected to rise only slightly until ECB President Mario Draghi announces key ECB policy decisions.

The yen has continued to weaken because of Japan’s loose monetary policy.

Niels Christensen, a currency strategist at Nordea in Copenhagen, said that “the downtrend in the yen is definitely still in place.”

He added:  “It is difficult to see why people would be buying the yen, unless there is risk aversion and lower equity markets.”

On November 7th the ECB unexpectedly cut interest rates, since then the euro has risen by about 6.5 percent against the yen.

Weakening yen

Japanese consumer inflation increased to a five year high in October (at 0.9 percent). However, this is still far from the country’s target of 2 percent – indicating that the Bank of Japan may ease monetary policies again in 2014.

Leuchtmann said that Japan needs a trend of a wakening yen.

Sterling reaches an 11 month high

On Thursday the Bank of England (BoE) decided to cut down on the housing sector stimulus, which resulted in the sterling reaching an 11 month high of $1.6375 against the dollar.

The move by the BoE has made traders more confident regarding the UK’s economic outlook.