Investing.com -The dollar was lower against the yen on Friday as steep declines in the euro and a broad based selloff in emerging economies bolstered safe haven demand for the yen.
USD/JPY ended Friday’s session down 0.69% to lows of 101.99, and finished the week 0.63% lower.
The pair is likely to find near-term support at 101.60 and resistance at 102.92, Friday’s high.
Safe haven demand for the yen was boosted after data on Friday showed that the annual rate of euro zone inflation slowed in January, fuelling expectations that the European Central Bank may need to tighten policy in order to support the recovery in the region.
The annual rate of euro zone inflation slowed to 0.7% in January, Eurostat said, after a 0.8% gain in December. Analysts had expected the inflation rate to tick up to 0.9%.
It was the fourth consecutive month the inflation rate came in at less than 1% and was well below the ECB’s target of 2%. The ECB unexpectedly cut rates to a record low 0.25% when inflation fell to a four-year low of 0.7% in October.
The common currency fell to two-month lows against the yen, with EUR/JPY dropping 1.07% to 137.75, extending the months losses to 1.89%.
The yen received an additional boost after data on Friday showed that the annual rate of core inflation in Japan accelerated to 1.3% in January, the highest level in five years.
Risk aversion was also supported by fears over the outlook for emerging markets, amid fears over the impact of cuts to the Federal Reserve’s stimulus program and worries over a possible slowdown in China.
On Wednesday the Fed said it would scale back its monthly asset purchase program by another $10 billion to $65 billion, citing improvements in the labor market.
Data released on Thursday showed that the U.S. economy grew 3.2% in the fourth quarter, in line with expectations.
On Friday, U.S. data showed that consumer spending rose 0.4% in December, above expectations for an increase of 0.2%.
A separate report showed that the University of Michigan’s consumer sentiment index ticked down to 81.2 in January from 82.5 in December, but was better than the preliminary reading of 80.4 and forecasts for a reading of 81.0.
In the week ahead, investors will be keenly anticipating Friday’s U.S. nonfarm payrolls report for January after December’s report showed that the economy added far fewer jobs than expected.
Interest rate decisions by the ECB, the Bank of England and the Reserve Bank of Australia will also be in focus.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, February 3
The Institute of Supply Management is to produce data on manufacturing activity, a leading economic indicator.
Tuesday, February 4
The U.S. is to produce data on factory orders, a leading indicator of production.
Wednesday, February 5
Japan is to publish data on average cash earnings.
The U.S. is to release the ADP report on private sector job creation, which leads the government’s nonfarm payrolls report by two days. Meanwhile, the ISM is to publish a report service sector activity.
Thursday, February 6
The U.S. is to publish the weekly report on initial jobless claims as well as data on the trade balance.
Friday, February 7
The U.S. is to round up the week with the closely watched government data on nonfarm payrolls and the unemployment rate.