(Reuters) – The euro rose to a four-year high against the yen and traded up against the dollar on Friday after much stronger-than-expected German business sentiment pointed to a continued rebound in Europe’s largest economy.
The euro was 0.3 percent up at 136.81 yen, having risen as high as 136.995 yen. Against the dollar it was 0.2 percent up at $1.3513.
Germany’s closely-watched Ifo survey of business sentiment rose far more than forecast in November, reaching its highest level since April 2012.
That added to positive sentiment about German growth, the engine of the euro zoneeconomy.
A ZEW survey this week also showed German investor sentiment at its highest in four years while a purchasing managers index (PMI) release suggested the private sector’s expansion was gaining traction.
The euro was also supported by comments from European Central Bank President Mario Draghi, who played down the possibility of the bank implementing negative deposit rates.
Reports the ECB would start charging banks to park cash with it overnight had pressured the euro on Wednesday, extending its losses after Federal Reserve minutes a day before that suggested U.S. stimulus could be scaled back earlier than expected.
The single currency shrugged off comments from ECB Chief Economist Peter Praet that the euro zone faces deflationary pressures.
The dollar hit a four-and-a-half-month high of 101.36 yen as the Japanese currency was weakened by expectations Bank of Japan monetary policy would remain loose and a rise in Japanese stocks to six-month highs on Friday.
BOJ Governor Haruhiko Kuroda said earlier he did not think the yen was at abnormally low levels and he did not see an asset bubble occurring in Japan.
The Nikkei .N225 and the yen have been moving in counter-step for months, with every rally in the share index a signal for speculators to sell the yen. A lower currency then promises to boost Japanese exports and earnings, further supporting shares.
Aaron Smith, managing director at currency hedge fund firm Pecora Capital, said short-term technical factors point towards buying the dollar versus the yen.
“We are at a crucial level in dollar/yen. If 101-102 fails, we can see a dive below 100 and resumption of the 300 pip range in the 97-100 region,” he said.
“However, we are cautiously optimistic that a breakout of further yen weakening is in the cards for 2014.”
