FX.co ★ Yen Slumps To 1-month Low Against Dollar

Yen Slumps To 1-month Low Against Dollar

(RTTNews) - During early European deals on Tuesday, the yen pared the gains it posted in Asian trading against most major currencies as the European stocks opened higher for a sixth straight day as investors continued to increase hopes on an economic stimulus plan from the incoming U.S. administration. Most Asian shares were also closed higher today. The yen thus plunged to a 1-month low against the dollar and a new multi-week low against the pound. Meanwhile, the yen eased from a 13-day high against the franc.

Tokyo stocks ended marginally higher today. The Nikkei 225 Stock Average rose 37.72 points, or 0.4%, to 9080.84. The Topix index of all the Tokyo Stock Exchange First Section issues rose 0.29 point, or 0.03%, to 876.20.

Japan's monetary base was up 1.8 percent on year in December, the Bank of Japan said today. That follows a 1.9 percent annual increase in November to 88.85 trillion yen. For the fourth quarter of 2008, the monetary base gained 1.7 percent on year. For all of 2008, the monetary base added an annual 0.1 percent.

The yen lost ground against the dollar after hitting a high of 92.86 by about 11:15 pm ET Monday. The yen dipped to a 1-month low of 93.84 at 3:20 am ET Tuesday and this may be compared to yesterday's New York session close of 93.35. If the Japanese currency falls further, it is likely to target the 97.5 level.

The yen jumped to 135.48 against the pound before reversing direction at 2:00 am ET Tuesday. The yen slipped to a 19-day low of 137.96 per pound by about 4:05 am ET. The next downside target level for the yen is seen at 139.2. The pound-yen pair was worth 137.32 at Monday's close.

In economic news from UK, consumer sentiment moved to the lowest point on record in December. The Nationwide Building Society reported that its consumer confidence index for the U.K. declined 4.0 points last month, to a reading of 47.0, the lowest in the four-year history of the survey.

UK house prices declined for the ninth straight month to show a record fall in December. Outlook for 2009 remains subdued, but low supply would possibly assist in recovery, a report from Nationwide Building Society said. The latest monthly survey showed that annual fall in UK house prices was 15.9% compared to November's 13.9% decrease. Economists had expected an annual fall of 14.7%. House prices dropped 2.5% in December from the prior month. In November, house prices were down 0.4%.

Against the Swiss franc, the yen soared to a 13-day high of 83.43 by about 12:20 am ET Tuesday. Thereafter, the yen eased and the pair is currently worth 83.95, compared to 84.13 hit late New York Monday. The near term support level for the yen is seen at 85.9.

In early trading on Tuesday, the Japanese yen strengthened to a 6-day high of 125.61 against the European currency. On the upside, 125.4 is seen as the next target level for the yen. The euro-yen pair closed Monday's deals at 127.24.

The euro fell against the yen as investors decreased their holdings of the common unit due to growing concerns that the European Central Bank may cut its rates again next week.

The Euro-zone CPI report for December is due out shortly.

Turning to the US, the factory orders, pending home sales and the ISM non-manufacturing reports have been slated for release in the New York morning.

The Federal Reserve is scheduled to release the minutes of its December 16th meeting at 2 pm ET today.

While announcing an interest rate cut in the range of 0%-0.25% at its December meeting, the FOMC noted that the outlook for economic activity has weakened further, with a deterioration in labor market conditions, a decline in consumer spending, business investment and industrial production and tighter credit market conditions. The Committee acknowledged the diminishing of inflationary pressures and also expressed its view that inflation will moderate further in coming quarters in light of the slowing economic growth.

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