Yen trading was the main feature in Asian markets on Friday as the Japanese currency was subjected to fresh selling pressure. The US dollar continued to take advantage of higher Treasury bond yields while the yen remained the favourite choice as global funding currency. USD/JPY pushed to fresh five-year highs above 103.90 while EUR/JPY also moved to the highest levels since 2008 with a peak around 142.80.
The Australian dollar maintained a heavy tone following sharp losses the previous day. AUD/USD did find some support on approach to the 0.89 area, but still registered a seventh consecutive weekly loss for the first time in 28 years.
The Euro was subjected to selling pressure during the European session as profit taking kicked in. Technical factors were also important and a break the 1.3740 EUR/USD support area helped trigger fresh selling and lows around 1.3710.
There was a larger than expected repayment of LTRO funds in the latest week, primarily reflecting the fact that the ECB will not be accepting payments during the holiday period. The data also emphasised that net liquidity in the Euro area is still tightening which helped pull EUR/USD from its lows.
The US data did not have a significant impact with position adjustment then tending to dominate ahead of extremely important sessions next week with the Federal Reserve decision on Wednesday.
Equity markets came under pressure soon after the New York open which did have a significant impact on the yen. USD/JPY retreated back to the 103.10 area with some covering of yen shorts ahead of the weekend also a significant feature as EUR/JPY retreated back to below 142.0. EUR/USD resisted a further test of lows with retail investors again forced to cover short positions.
Sterling tended to underperform on Thursday and was again subjected to significant selling on Friday as EUR/GBP rallied to one-month highs around 0.8440. There was no major fundamental impetus during the day with further evidence of fund selling ahead of the year-end.
GBP/USD was subjected to further stop-related selling once support levels around 1.6320 and 1.6300 were broken and there was a slide to lows around 1.6260 before a corrective recovery.