The Japanese yen edged lower against its major rivals in early deals Thursday despite an across the board weakening of equities in Europe as successful bond auctions from Spain and France boosted high-yielding currencies.
Spain sold EUR 2.2 billion of debt maturing between 2014 and 2017, surpassing the maximum target of EUR 2 billion set for the auction, although yields continued to surge. France sold EUR 8.43 billion in debt, with yields falling on average 1.43 percent compared with 1.72 percent last month.
European stock markets are trading lower following the Federal Reserve's decision to extend "Operation Twist"and not implement a third round of quantitative easing that investors had expected.
Equities also fell as China's manufacturing activity contracted further in June to a seven-month low of 48.1 from 48.4 in May.
Thus far, the U.K. FTSE 100 index dropped 0.63 percent, Germany's DAX fell to 0.43 percent and France's CAC-40 index slipped to 0.40 percent.
The yen reached nearly a 1-month low of 79.96 against the US dollar around 5:45 am ET. The yen is poised to extend its decline as the USD/JPY 4-hour chart targets the technically important 38.2 retracement level at 80.15/20.
Against the pound, the yen slipped to 125.73 around this time, its weakest level since May 23. The next support for the yen is seen around the 126.50 level.
The pound spiked higher as U.K. retail sales recovered at a faster than expected pace in May after easing in April.Retail sales volume, including automotive fuel, rose 1.4 percent from the prior month, when it was down 2.4 percent. The increase was bigger than the expected growth of 1.2 percent.
Likewise, retail sales volume logged an annual growth of 2.4 percent, offsetting April's 1.1 percent drop. The increase exceeded the consensus forecast of 2.1 percent.
The yen tested yesterday's lows against the Swiss franc, slipping to 84.44 before leveling off around 5:40 am ET. The near-term support for the yen is seen around the 84.50 level and a move below this could set its weakest mark in nearly 1-month.
Switzerland's trade surplus surged to EUR 2.48 billion in May due to an increase in exports, from EUR 1.25 billion a month ago. Exports rose 1.8 percent month-on-month, reversing a 0.7 percent fall in the previous month. Meanwhile, imports slipped 0.1 percent after rising 3.1 percent in April.
The yen also tested yesterday's 4-week lows against the euro, falling as low as 101.40 before holding steady around 5:45 am ET. The yen is presently worth 101.26 with 102.50 seen as the immediate support and 102.15 seen the medium-term target level.
Eurozone private sector output for June shrank its the steepest pace in three years to remain at 46, unchanged from May's 35-month low. Economists expected a decline to 45.5. A PMI reading below 50 signals contraction in activity.
The services activity index,meanwhile, improved to 46.8 from 46.7 in May. However, the reading remained in negative territory. The reading was expected to fall to 46.4.
The yen slumped to a 7-week low of 63.91 against the NZ dollar around 5:45 am ET. The kiwi-yen pair is presently worth 63.83 with 64.30 seen as the next likely target level.
The kiwi outperformed as New Zealand's economy grew at a much more than expected pace of 1.1 percent in the first three months of 2012 after having been at a revised 0.4 percent for the previous quarters. Economic activity was up 2.4 percent compared with the March 2011 quarter.
The yen fell as low as 81.35 against the Australian dollar before moving sideways around 5:45 am ET. On the downside, the Japanese currency may find target around the 81.50 level in the near-term.
A recovery productivity growth may ease upward pressure on unit costs and inflation, the Reserve Bank of Australia said in its latest quarterly bulletin, released today. It will also allow stronger growth in real incomes, the central bank said.
The yen slipped to 78.37 against the Canadian dollar in early deals Thursday, its weakest level since May 23. If the yen weakens further, 78.70 is seen as the next probable support level.
Looking ahead, Canada's leading indicators for May and retail sales for April, the US weekly jobless claims, existing home sales for May, house price index for April, leading indicators for May, Philadelphia Federal Reserve's manufacturing index for June are expected to give direction to the market in the upcoming session.
by RTT Staff Writer
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