Forex: Friday’s review

The yen strengthened from an almost nine-month low against the dollar as technical indicators showed the decline was overdone before elections on Dec. 16 where Japan’s opposition leader Shinzo Abe is projected to win. The Japanese currency pared a weekly loss as Abe has called on the Bank of Japan to provide “unlimited easing” and set an inflation target of at least 2 percent.

The euro reached the highest in seven months versus the dollar as preset buy orders were triggered. The euro touched an eight-month high versus the yen after EU finance ministers meeting overnight in Brussels agreed to put the European Central Bank in charge of all euro-area lenders in a deal that paves the way for the currency bloc’s firewall fund to provide direct bailouts to banks.

The dollar weakened against major peers after consumer prices in the U.S. fell more than forecast last month, a sign the Federal Reserve’s bond-buying program hasn’t caused inflation. The 0.3 percent decrease in the consumer-price index was the first drop since May and followed a 0.1 percent gain the prior month, the Labor Department reported today in Washington. The median estimate of 80 economists called for a 0.2 percent drop. The core index, which excludes volatile food and energy costs, climbed less than projected.

The Canadian dollar was lower against the U.S. dollar after the bank downgrades by S&P and the weak data on shipments in the manufacturing sector in Canada. S&P has downgraded the ratings of several banks in Canada. The list of banks whose ratings have come under attack, included ScotiaBank, Banque National and several smaller institutions. In November, shipments in the manufacturing sector of Canada fell 1.4%