The yen weakened against most of its major counterparts during the Asian trading session due to a report showing Japanese consumer prices fell for a fourth month in a row. This fuelled speculation that the Bank of Japan will expand monetary easing at its next meeting, leading to a yen sell-off. This kept the yen trading near a nine-month low against the dollar as USDJPY climbed to 81.50.
The Australian dollar hit a ten-month high against the Japanese currency, with the AUDJPY pair peaking at 87.95, the highest level since May 11 of last year. The aussie is expected to hold firm due to an improving global growth outlook, which is spurring prospects that the Reserve Bank of Australia will keep its key interest rate unchanged at its policy meeting next week. AUD is also helped by improved manufacturing data from China on Thursday. China is a major export market for Australia.
The euro also edged up against the yen, with EURJPY rising steadily to a session high of 107.93 after opening in Asia at 108.43. EURUSD opened the Asian session at 1.3310 and was supported by EURJPY, but fell to 1.3292. USDJPY strength is giving dollar general strength.
The dollar gained support after U.S. Federal Reserve Chairman Ben Bernanke in his testimony to Congress this week gave no signal the Fed would undertake further bond purchases. No more QE3 will keep dollar from weakening.
There will likely be more downside to the EURUSD pair as risks still linger about euro zone debt crisis, as the euphoria from the big ECB cash injection (LTRO) earlier this week is fading.