Forexpros – The U.S. dollar fell sharply against the yen in holiday thinned trade on Friday, as ongoing concerns over the debt crisis in the euro zone continued to support demand for the traditional safe haven yen.
USD/JPY hit 76.85, the pair’s lowest since November 22; the pair subsequently consolidated at 76.90 by close of trade, tumbling 1.34% over the week.
The pair is likely to find support at 76.57, the low of November 18 and resistance at 77.73, Friday’s high.
The dollar’s losses were exacerbated by thin trading conditions on Friday, but heavy selling of the EUR/JPY pair, which dropped to an 11-year low, also weighed on the greenback.
The euro came under renewed selling pressure on Thursday after Italy’s Treasury sold just over EUR7 billion of long-term debt maturing between 2014 and 2022, below the maximum target of EUR8.5 billion.
Following the auction, Italian 10-year bond yields remained above the 7% threshold seen as unsustainable in the long term, fuelling fears that the euro zone’s bailout facility would be insufficient if the country is forced to seek financial aid.
The sale was seen as the first test of European banks’ willingness to purchase long-term sovereign debt of distressed euro zone countries, following a EUR500 billion liquidity operation by the European Central Bank.
Elsewhere, Spain’s new government said its 2011 budget deficit may be much wider than initially forecast and joined with Italy in a push for austerity measures aimed at restoring investor confidence.
Looking ahead to 2012, the yen looks likely to continue to perform strongly against the dollar and the euro, despite plans by Japan’s ministry of finance to increase the size of its intervention war chest to more than JPY65 trillion.
Meanwhile, concerns over the euro zone’s debt crisis look set to keep the single currency under pressure going into the New Year.
In the week ahead trading volumes are expected to remain light. Meanwhile, the U.S. is to release key reports manufacturing activity, jobless claims and non-farm employment change.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, January 2
Markets in Japan, the U.S., U.K., euro zone, Australia and New Zealand will be remaining closed for national holidays.
Tuesday, January 3
Markets in Japan will be remaining closed for a national holiday.
The U.S. is to publish data on manufacturing activity, a leading indicator of economic health, while the Federal Reserve is to release the minutes of its most recent policy-setting meeting.
Wednesday, January 4
The U.S. is to publish government data on factory orders, a leading indicator of production.
Thursday, January 5
The U.S. is to publish industry data on non-farm employment change, a key indicator of consumer spending, followed by weekly government data on unemployment claims. The country is also to release a report by the Institute for Supply Management on service sector growth, as well as data on crude oil stockpiles.
Friday, January 6
The U.S. is to round up the week with a government reports on non-farm employment change and the unemployment rate. The country is also to release government data on average hourly earnings, a key indicator of consumer inflation.
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