The euro extended its losses in Asian trade on Friday after a weak set of inflation data raised fears the debt-wracked eurozone could sink into a deflationary spiral.
The single currency bought $1.3547 and 133.04 yen in Tokyo, against $1.3579 and 133.60 yen in New York and sharply lower than the $1.3708 and 134.85 yen late in Asia on Thursday. The dollar slipped to 98.16 yen on Friday from 98.37 yen.
Traders dumped the euro on Thursday after the European Union statistics agency Eurostat showed inflation across the 17-country eurozone fell sharply in October to 0.7 percent, the lowest level in nearly four years.
The figure was well below the European Central Bank's target of two percent and raises concerns the region could be in for a period of deflation, putting pressure on policymakers to lower interest rates even further.
“Data has been in the driving seat overnight, in particular the unexpectedly sharp drop in eurozone inflation data,” National Australia Bank (NAB) said in a note.
The weak data spawned speculation that the ECB would soon lower interest rates to prop up the economy, a senior dealer at a Japanese bank told Dow Jones Newswires. Lower interest rates generally hit a region's currencies as investors seek out other assets for better returns.
The Australian bank said the data “brings next week's ECB Council meeting into sharp relief”.
While NAB does not anticipate a cut in the ECB's key rate from an already record low of 0.50 percent, “there seems certain to be a lively discussion”, it said.
The dollar continues to move in a tight range against the yen after the US Federal Reserve on Wednesday kept its stimulus programme in place - a negative for the unit - but gave an upbeat view of the economy that dealers saw as a hint of a wind down.
Markets have been closely watching for clues as to when the Fed will start reeling in its monetary easing scheme. The bank has said any pullback will only come if the economy is strong enough. - Sapa-AFP