Yen hits 15-year high versus dollar

Tom Tong17/Mar/2011Currency Updates

GBP

Sterling fell against a broadly stronger dollar on Tuesday after uncertainty over Japan’s on-going nuclear crisis prompted investors to jump onto the USD ‘safe haven’. Investors continued to cut positions in riskier currencies, including the pound, following the hefty stock and commodity sell-off post-earthquake.

UK unemployment has risen to its highest level in 17 years. The figures, released by the UK’s Office for National Statistics, showed an increase of 27,000 people out of work in the three months to the end of January, taking total unemployment to 2.53 million. It also showed wages are failing to keep track with inflation, rising at only half the rate of inflation. The average UK worker now earns £432 per week before bonuses.

EUR

The single currency picked up ground on Wednesday afternoon after a shaky start after Moody’s downgraded Portugal’s debt rating by two levels, highlighting concerns that European officials will be able to prevent a wider sovereign debt crisis. Debt-ridden Portugal, Greece, and Ireland are in a difficult position — failure to produce sweeping fiscal reforms will upset the bond markets, but cuts will likely result in uncompetitive levels of economic growth.

Eurozone inflation breached the European Central Bank (ECB) target for a third straight month in February due to higher energy prices. Consumer price index (CPI) rose 2.4 percent year-on-year, following a 2.3 percent increase in January, European Union Statistical agency Eurostat said Wednesday, confirming a preliminary report released on March 01. That was the highest level since October 2008. The ECB has an inflation target of ‘below but close to 2 percent’. In December, inflation crossed the target for the first time in more than two years.

USD

On Wednesday America’s leading indicator of consumer inflation (PPI m/m), which includes food and energy prices, showed substantial increases in the month of February. The Labor Department said its producer price index jumped by 1.6 percent in February following a 0.8 percent increase in January. The bigger than expected increase in producer prices marked the fastest pace of growth since a 1.9 percent increase in June of 2009.

Today investors will keep an eye on the CPI m/m, which excludes food and energy prices.

JPY

The yen rose to its highest level against the USD in over 15 years. Policy makers of the Bank of Japan agreed to carefully observe the outlook for economic activity as well as prices and to take policy actions in an appropriate manner, the minutes of the February meeting showed Thursday morning. The minutes primarily discussed the situation that prevailed before a killer earthquake struck the island nation last Friday, resulting in mammoth loss of lives and property. The members were of the view that the central bank should make contributions consistently to help the nation to overcome deflation and to bring it back to a sustainable growth path with price stability, the minutes showed.

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Written by Tom Tong

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