EUR/JPY approaches 180.00 on weak data, Yen intervention threats 

• The Euro reaches session lows at 180.30 against the Yen, down from all-time highs at 181.41.
• Eurozone and German business activity data disappointed on Friday.
• Intervention threats and strong Japanese inflation data have provided some support to the Yen.

The Euro snapped a four-day rally against the Japanese Yen on Friday and is dropping about 0.7% on the day so far, reaching session lows at 180.30. The pair is retreating from the all-time high of 181.41 hit on Thursday, weighed down by downbeat Eurozone macroeconomic data and threats of intervention from Japanese authorities.

Eurozone’s Preliminary HCOB Purchasing Manager’s Index figures for November have disappointed investors. Manufacturing activity contracted to a 49.7 reading after having reached a standstill in October, against expectations of an improvement to 50.2. The Services sector expanded, although at a slower pace of 52.4, missing the market consensus of a steady 52.5 reading.

Likewise, German business activity added to evidence of the weak momentum of the region’s leading economy, adding pressure on the Euro. The German Manufacturing sector accelerated its contraction to a 48.4 in November from October's 49.6 reading, while the services PMI eased to 52.7 from 54.6, well beyond market expectations of a more moderate slowdown to a 53.9 reading

Intervention threats boost Yen recovery

The Yen, on the other hand, has received some support from comments by the Japanese Finance Minister. Satsuki Katayama, who said in a news conference on Friday, that Japanese authorities are ready to take “appropriate action” against excessive volatility, which has been seen as a clear warning of intervention.

Somewhat earlier, Japan’s Statistics Office released the National Consumer Prices (CPI) Index report, revealing higher inflationary pressures in October. The headline CPI accelerated to a three-month high at 3.0%, from 2.9%, with the core CPI showing identical numbers.

These figures have heightened hopes that the Bank of Japan might raise interest rates in the next meetings, in December or January, despite political pressures to keep an expansive monetary policy. The BoJ Governor, Kazuho Ueda, reinforced this view in a testimony at the parliament, where he warned about higher inflationary risks stemming from a weak Yen, which might push import costs and broader consumer prices higher.

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