The US dollar finally hit the key psychological level of 100 yen today, rallying 0.2% in the European session as the yen extended weakness on the back of comments from Japan’s finance minister today. Taro Aso mentioned that Japan was willing to use market intervention as a policy tool in order to help fight deflation and revive the Japanese economy.
This led to a yen sell-off and USDJPY hit a two-month high of 100.03 yen.
Data released early in the US session showed US weekly jobless claims rose to 339K versus an expected 330K. Also the US trade deficit widened in September to $-41.8B versus $-39.0B forecast and a prior $-38.7B.
The data gave some weakness to the dollar, especially against the euro, but not much change against the yen. EURUSD rose to $1.3460 after the data from an earlier low of $1.3418 when the pair fell after weak Eurozone growth data. The Eurozone flash GDP came in lower at 0.1%, missing expectations for 0.2% and lower than a prior 0.3%.
The euro was weighed down by disappointing third quarter GDP data from France, as well as reports of slower growth in the Eurozone as a whole. The soft data fuelled speculation that the ECB may have to look for policy easing tools to help revive the economy. This will keep the euro vulnerable.
Sterling made up for losses made earlier after weak UK retail sales data. today which showed a 0.6% month-over-month drop in October, versus expectations for a 0.2% drop. The pound slid to a session low of $1.5988 but managed to rebound back above the key $1.60 level and rose to as high as $1.6061 early in the US session.
All eyes are on Fed President nominee Janet Yellen’s US Senate confirmation hearing at 10am Eastern time. Her Q&A session will be closely watched to see how dovish she will sound on the US economy. Yesterday, Yellen’s text of her testimony as releases and it had a dovish tone as she mentioned that the US economy still requires the Fed’s help, meaning stimulus measures were here to stay for a while. Such measures tend to weaken the dollar.