Yen Rallies, Euro Up On Rising Inflation Data

Yen rallies, euro up on rising inflation data

The yen rallied against the dollar and the euro also advanced versus the US unit Friday as traders reacted to news of higher inflation in Japan and the eurozone.

European and Asian stock markets traded mixed before Wall Street reopens from a break Thursday for the Thanksgiving holiday, and as consumers in the United States and elsewhere sought Black Friday bargains.

Traders closed out a rollercoaster month for assets caused largely by Donald Trump winning a second US presidential election — and also a result of the wars in Ukraine and Gaza.

Markets are tracking in particular developments surrounding Trump’s pledge to hammer China, Canada and Mexico with hefty tariffs on his first day in office in January.

In Asia on Friday, “expectations for a rate hike by the Bank of Japan firmed up after a hotter than expected inflation print”, noted Derren Nathan, head of equity research at Hargreaves Lansdown.

Forecast-busting consumer prices out of Tokyo boosted talk of another Japanese interest-rate hike next month, in turn sending the yen strengthening one percent against the dollar.

Consumer prices in Tokyo — seen as a bellwether for Japan as a whole — jumped to 2.6 percent in November, well up from October and much more than expected.

The Bank of Japan has hiked interest rates twice this year, while the yen was being supported also by forecasts that the Federal Reserve will lower US rates at its December meeting.

The BoJ lifted rates in March for the first time in 17 years followed by a second increase in July.

The stronger yen Friday weighed on Japanese exporters, causing the Tokyo stock market to close lower.

Hong Kong and Shanghai gained after Chinese authorities held a meeting to discuss plans to boost stunted consumption in China — a key goal for Beijing as it looks to kickstart the world’s number two economy.

– Eurozone inflation –

In Europe, the euro firmed against the dollar as official data showed the eurozone’s annual inflation rate rebounded further in November on resilient energy prices.

Year-on-year consumer price increases reached 2.3 percent, the EU’s official data agency said, continuing to bounce back from a three-year low of 1.7 percent in September.

Analysts said the latest reading was not expected to deter the European Central Bank from cutting interest rates next month as it focuses on addressing Europe’s sluggish growth.

Eurozone assets remained under pressure owing to uncertainty over budget cuts to reduce France’s huge deficit, and as Prime Minister Michel Barnier’s government struggles amid tough opposition from the right and left.

Economic weakness in Germany in particular has also dampened enthusiasm for the euro.

London’s stock market and pound were little changed heading into the weekend.

The Bank of England on Friday warned that growing geopolitical tensions pose a “significant” risk to banks and broader financial stability.

A half-yearly report from the BoE on risks to the financial system did not mention Trump, but noted the potential for “increased global fragmentation” of trade amid a broad range of geopolitical issues.

In commodities trading, oil prices slipped Friday with the OPEC+ alliance having postponed a meeting planned for this weekend until Thursday, with analysts saying there were signs of disagreement among the group over plans to increase output.

Bitcoin was sitting at about $97,500, having suffered a big drop at the start of the week.

– Key figures around 1230 GMT –