Forexpros – The euro trimmed losses against the yen on Tuesday, amid hopes of progress in tackling the debt crisis in the euro zone as investors eyed the outcome of a teleconference of finance ministers from the Group of Seven industrialized nations.
EUR/JPY pulled away from 97.05, the session low, to hit 97.79 during European afternoon trade, still down 0.14%.
The pair was likely to find support at 96.49, the low of May 31 and resistance at 98.81, the high of January 18.
Participating in the G7 discussion, Japan’s Finance Minister Jun Azumi said members of the group agreed to work together to deal with problems in Spain and Greece, adding that Japan will cooperate when possible.
Azumi also said that the strong yen is having a major impact on the Japanese economy, adding to speculation the central bank may resort to further easing measures after the Bank of Japan conducted a rate check on Friday.
The euro came under pressure earlier after Spain’s Treasury Minister Cristobal Montoro said that financial markets were effectively closed to Spain because of the current high level of the country’s borrowing costs.
The yield on Spanish 10-year bonds has surged to euro-era highs in recent weeks, hovering near the critical 7% threshold, which is seen as unsustainable in the long term, fuelling fears that Madrid will be forced to seek an international bailout in order to shore up its ailing banking sector.
Meanwhile, revised data showed that the euro zone’s services sector contracted at a slightly slower rate than initially expected in May, but still shrank at the fastest pace since June 2009.
The final euro zone services sector index posted a reading of 46.7 in May, up from a preliminary estimate of 46.5, but still below the key 50 level.
In Germany official data showed that factory orders dropped 1.9% in April, compared to expectations for a 1% decline, fanning concerns over the impact of the ongoing sovereign debt crisis on the region’s largest economy.
Another report showed that euro zone retail sales dropped 1% in April, disappointing expectations for a more modest 0.1% decline.
Elsewhere, the yen was lower against the U.S. dollar, with USD/JPY adding 0.36%, to hit 78.62.
Later Tuesday, the Institute for Supply Management was to release a report on U.S. non-manufacturing activity.
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