Euro stung by Juncker's comment, yen holds firm

SYDNEY Wed Jan 16, 2013 4:43am IST

Japanese 10,000 yen bank notes and coins are displayed March 3, 2006. REUTERS/Toshiyuki Aizawa

Japanese 10,000 yen bank notes and coins are displayed March 3, 2006.

Credit: Reuters/Toshiyuki Aizawa

SYDNEY (Reuters) - The euro had its winning streak clipped after a top European official complained about its recent run higher, while the yen held firm on Wednesday following a warning about its excessive weakness by a Japanese politician.

The single currency traded at $1.3297, pulling back from an 11-month high of $1.3404 set on Monday after the chairman of the euro zone finance ministers said the euro was "dangerously high".

Against the yen, the euro stood at 118.09, well off a 20-month peak of 120.13. The common currency also lost ground against commodity currencies like the Australian dollar.

Traders said Juncker's comments simply gave investors an excuse to cash in on recent gains and did not necessarily represent a reversal in its uptrend.

Still, some analysts said they wouldn't be surprised to see the dip morph into a bigger slide.

"The pullback from the 2013 high looks poised to turn into a larger correction, and we may see the euro-dollar fall back towards the $1.3100 region as heightening growth concerns fuels speculation for additional monetary support," said David Song, analyst at DailyFX.

The euro had rallied some 3 percent against the greenback in the past few sessions after the European Central Bank (ECB) sounded more upbeat about the region's recovery.

In a similar reaction that prompted a reversal in the yen, investors unwound bearish positions in the Japanese currency after Japan's Economics Minister warned that excessive yen weakness could boost import prices, hurting people's livelihood.

That helped send the dollar skidding as far as 88.28 yen from a 2-1/2 year high of 89.67 set on Monday. It last traded at 88.80.

Investors had turned negative on the yen in the past few weeks on expectation the Bank of Japan will be forced to take bold action to reflate a sluggish economy. New Prime Minister Shinzo Abe has been very vocal about getting the BOJ to tackle deflation once and for all.

With most of the attention focused on the yen as well as the euro, the dollar shuffled sideways against other currencies. The Australian dollar, for instance, was little changed at $1.0561, still within striking distance of a 4-month peak near $1.0600 set last week.

Barring any more comments on currencies from politicians, the market is likely to once again take its cues from economic news. In Asia, Japan's machinery orders for November are due followed by euro zone and U.S. inflation data.

(Editing by Wayne Cole)

  • Most Popular
  • Most Shared

Insight

REUTERS SHOWCASE

Border Talks

Border Talks

India names Ajit Doval as special envoy for China border talks.  Full Article 

WTO Deal

WTO Deal

U.S. seeks to step up India trade talks  Full Article 

Phone Masts

Phone Masts

American Tower to buy Bharti Nigeria phone masts for $1.1 billion  Full Article 

Infrastructure Plan

Infrastructure Plan

India targets private cash to build railways to its ports.  Full Article 

Shadow Banking

Shadow Banking

Reserve Bank planning more measures for NBFCs.  Full Article 

Auto Sector

Auto Sector

Hyundai Motor, Kia Motors lift 2014 global sales target on China, emerging markets  Full Article 

Oil Prices

Oil Prices

Some fund managers see oil falling to $60 without OPEC cut.  Full Article 

Project Shelved

Project Shelved

Jindal Steel shelves $10 bln project after coal setback.  Full Article 

Market Eye

Market Eye

Sensex, Nifty rise to record after China, ECB stimulus boosts risk appetite.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage