Yen strengthens this week

Story link: Yen strengthens this week

The Japanese yen saw gains late in the week after new data showed that Japan�s economy had grown more than expected, lifting the possibility that the Bank of Japan will raise interest rates when it meets next week. The late week gains came after declines early after warnings emerged from the G7 meeting last weekend of the danger of risky carry trades in higher-yielding currencies financed by yen.

The yen added 1.1 percent during the week versus the euro, to �156.60, while it added 2 percent against the US dollar and sterling, to �119.40 and �232.70 respectively. Some analysts, however, were worried that the yen could not maintain its new strength.

Sterling was hurt by weak retail sales figures for January and a decline in UK inflation, despite a mid-week report that the Bank of England expects inflation to remain above the government�s 2 percent target. The UK currency dropped 0.1 percent over the week in relation to the US dollar, to $1.3115, while it fell 0.9 percent to �0.6730.

The US dollar dropped 0.9 percent to $1.3115 versus the euro on a decline in industrial production in the US as well as a drop in the number of houses being built in the United States. The weak data came in contrast to news of growth in Eurozone economies. The greenback was not helped by comments from Federal Reserve chairman Ben Bernanke that inflation pressures in the US economy were easing.