After what in hindsight may have been a short-lived run-up for the yen the past few weeks, the currency market has reverted back to a familiar pattern -- the dollar strengthening as the euro and yen slide on worries about their economies.
Recent data from Japan shows that little has been done to improve its economy, despite the election of a new government that promised fiscal reform. The country's latest GDP report shows that it might be slipping into its second recession in two years, which would be its fourth in the past decade. Last week, the government downgraded its economy for the fifth straight month, and the
Bank of Japan's
monthly report this morning said the economic slowdown is intensifying.
The yen had stumbled to new one-month lows against the dollar and euro after the BOJ report was released, but the Japanese currency came off those lows later. It was lately trading for 123.33 yen per dollar, and the euro had slipped to near its closing price on Friday against the yen after the eurozone released more dire news about its economy.
The eurozone reported this morning that core inflation is its highest in eight years, hitting 3.4% year-over-year. The news sent the euro tumbling down to 105.97 yen per euro, slightly off Friday's close of 105.83; it fell to $0.8594 from $0.8611 at last close. The
European Central Bank
has defended its mere 25 basis-point reduction in interest rates this year by saying its main goal is to contain inflation vs. stimulating the economy. The U.S.
Federal Reserve has cut interest rates by 250 basis points this year.
intervention by the Swedish
to support its own currency helped to prop up the euro last week.
A recent rise in the British pound -- it struck new 16-year lows the past two weeks -- was derailed today.
, president of Germany's
and a member of the ECB, said the pound is too high to be admitted to the eurozone's single currency. The pound fell on the news, lately trading for $1.4011 from last week's close of $1.4030.
The Australian dollar was little changed this morning, trading for $0.5226, slightly lower than Friday's close of $0.5236. The U.S. dollar also climbed a bit higher overnight against the Canadian dollar, lately trading for C$1.5270, a step up from its last close of C$1.5238.
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