Daily Forex Round-Up: Bad Day for the Euro (EUR), Yen (JPY)

on Nov 21, 2012

The news about the failed Greece funding talks set the tone for the euro on Wednesday although the single currency managed to claw back some of its losses against the greenback and the yen later during the day. The yen meanwhile fell across the board with data about Japan’s weak exports dragging the Japanese currency down, adding to expectations of further monetary stimulus by the Bank of Japan (BOJ). The pound, however, had a good day, with minutes from the Bank of England (BoE) boosting the sterling against both the US dollar (USD) and the euro (EUR).

**Euro Claws Back Some Losses, but Still Trading Low**
On November 21, the Financial Times reported that the euro, which dropped sharply in the morning after Eurozone finance ministers once again delayed their decision about Greece’s additional funding, regained some ground to trade down 0.3 percent at $1.2782. The euro’s downward movement was contained with investors focused on the progress made by European leaders to reach an agreement on Greece.

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“Perhaps the most important take-away from the failed talks was that it appears to have spurred a tactical shift by Germany,” points out Marc Chandler, global head of currency strategy at Brown Brothers Harriman, as quoted by Reuters. “It seems more determined than it has been in making sure that the Athens program remains intact.”
In addition, the euro also advanced against the yen, with Reuters reporting that the single currency crossed ¥105 for the first time since May.

**Japan Export Data Add to Yen Weakness Factors**
Hitting a six and a half month high versus the yen, however, was not a difficult job even for the euro, given that Japan’s currency was dragged down by both speculation of further BOJ monetary easing and by data showing that Japan’s exports declined for a fifth consecutive month. “The trade numbers have added to the case for yen weakness,” points out Sean Callow, a senior currency strategist at Westpac Banking Corp (ASX:WBC), as quoted by Bloomberg. “The struggles of the Japanese exporters are becoming increasingly clear.”

!m[](/uploads/story/872/thumbs/title_pic_inline.png)Reuters reports that Japan’s currency fell to a seven and a half month low against the greenback, with the dollar breaking above ¥82 and triggering stop-loss orders.
**Pound Boosted by BoE Minutes**
And while the yen and the euro struggled on Wednesday, the British pound rose to its strongest level in a week versus the euro. The sterling’s advance against the single currency, however, was not only on account of the failed Greek talks, but was also due to the BoE minutes which showed that a large majority of the central bank’s Monetary Policy Committee had voted in favour of leaving the BoE’s quantitative easing programme unchanged.

Bloomberg reports that the pound rose 0.1 percent to 80.38 pence per euro at 1:52 p.m. GMT after appreciating to 80.06 pence earlier and also gained 0.1 against the greenback, to $1.5947. “The fact that the Bank of England suggested it’s not going to cut rates any time soon is supportive for the pound,” noted Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd, as quoted by Bloomberg. “The central bank still leaves a door open for further stimulus. That, for me, is sterling positive. Uncertainty in the euro region also helps the pound.”
**Brazil’s Real Tumbles**
Brazil’s real (BRL) also declined on Wednesday, with Bloomberg reporting that President Dilma Rousseff told the Valor Economico newspaper that the country’s currency was “overvalued”, which in turn fuelled speculation that the government would allow it to depreciate further. The real lost 0.5 percent against the greenback to 2.0915 per dollar, the lowest on a closing basis since May 2009.


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