The yen continued to be mauled, post-Bank of Japan policy announcement. It fell to a near 7-year low against the dollar, briefly entering the 112 yen handle.
The diverging monetary policies between the Bank of Japan and the US Federal Reserve will likely push the dollar higher versus the yen in coming months. As the BoJ announced more policy easing measures today, the Fed on Wednesday announced its decision to end its bond buying program and is on track to start raising interest rates next year.
Meanwhile, some upbeat US economic data released today gave further support for the greenback. Markets shrugged off the weak PCE (personal spending) numbers after the Chicago PMI beat forecasts. The business barometer soared to 66.2 in October from 60.5 in September, versus 60.0 forecast. The main risk for the dollar next week will be the US nonfarm payrolls.
The euro was weighed down against the dollar as the latter gained across the board after the BoJ surprise and US data. The single currency came under renewed pressure after poor German retail sales. Meanwhile, the core Eurozone flash CPI data also disappointed. A slew of weak data recently has indicated that the Eurozone outlook has deteriorated. By late European session trading, the euro dipped to as low as 1.2484, marking a 2-year low.
The euro however fared better against the broadly weaker yen, trading above the key technical level of 104.00 and hitting as high as 140.69 in the European session. The main driver for the euro next week will be the European Central Bank policy decision.
The pound was weak due to the stronger dollar, trading as low as 1.5941. The Bank of England policy meeting next week will be a key risk event.