2009.01.1122:30:00UTC+00Japanese yen shows strength against majors; soars to 1-month high versus euro

During early Asian deals on Monday, the Japanese yen showed strength against its major counterparts as a fall in stock prices prompted investors to reduce holdings of higher-yielding assets funded in Japan. The yen thus rose to a 1-month high against the European currency, new multi-week high versus the Swiss franc, 2-week high against the US dollar and a 6-day high versus the British pound.

Against the US dollar, the Japanese yen showed strength during early Asian deals on Monday. At 5:45 pm Eastern Time Sunday, the yen reached a 2-week high of 89.95 against the dollar, compared to 90.31 hit late New York Friday. Thereafter, the Japanese currency eased but rebounded shortly and the dollar-yen pair is now worth 90.11.

The Japanese yen that closed Friday's North American session at 121.42 against the European currency climbed to 1-month high of 120.44 at 7:35 pm ET Sunday. The euro-yen pair is currently quoted at 120.88.

The euro declined on speculation that the European Central Bank will lower interest rates this week. The ECB meets to discuss rates on January 15. Markets have largely priced in a 50 basis point cut, with some investors betting on a 75 basis point move after the last such reduction in December. The ECB has cut rates by 175 basis points to 2.5 percent since October as inflation decelerated rapidly from a July peak of 4.0 percent along with a sharply slowing economy and falling oil prices.

Euro area annual inflation slowed more than expected to 1.6% in December, a flash estimate from the Eurostat showed today. In November, the rate was 2.1%. Economists had expected the inflation rate to ease to 1.8%.

Policy makers are cutting borrowing costs to spur spending after a seizure in global credit markets helped trigger the euro region's first recession in 15 years.

Against the British pound, the Japanese currency edged higher to a 6-day high of 135.57 during Monday's early Asian deals. As of 10:05 pm ET, the yen was worth 135.94 against the sterling, compared to Friday's closing value of 137.07.

The Japanese currency that closed Friday's New York deals at 81.12 against the Swiss franc advanced to 80.61 during Monday's early Asian trading. This set the highest point for the yen since December 19, 2008. The franc-yen pair is presently trading at 80.70.

In the European session, the Bank of France business sentiment index and the German wholesale price index-both for the month of December are expected.

There are no significant economic reports scheduled to be released from US today.

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