Euro tumbles in Asia

The yen dropped to one-month lows against the dollar and the euro on Wednesday, as traders took data showing Japan had logged its first annual trade deficit since 1980 as a cue to snap up gains in the Japanese currency. Selling in the yen picked up steam on the back of unwinding of yen long positions placed by speculators, with model and macro funds also spotted pressuring the Japanese unit.
Tokyo exporters limited the downside for the yen, showing strong dollar-selling interest right below 78 yen, after the safe-haven yen on Tuesday suffered its biggest one-day fall since Japan intervened in the market in October. Japan logged an annual trade deficit in 2011 for the first time in over 30 years after the March earthquake, tsunami and nuclear crisis pushed up energy imports and the strong yen and supply chain disruptions weighed on exports.
Takuji Okubo, chief economist at Societe Generale in Tokyo, was sceptical the data would have a lasting impact on the yen. "Japan's current account balance is still in surplus, as the income from Japan's vast foreign assets, both direct investment as well as its security investments, is more than offsetting the deficit from trade. The dollar reached as high as 77.98 yen on trading platform EBS, its highest level since late December, and traders said it was likely to extend these gains later in the session.
Chartists said that any gains above these points may prove fleeting, as the greenback would have to battle thick resistance posed by the 200-day moving average at 78.35 yen and the 61.8 percent retracement of the October-January fall at 78.31. The broad weakness in the yen saw the euro hit a four-week peak of 101.56 yen. The pair was trading above 109 yen as recently as November, before falling to an 11-year low of 97.04 on January 16.
Many Japanese exporters set their euro rate targets at 105 yen, so the pair would run into heavy selling pressure ahead of that level, traders said. With the yen stealing the show on Wednesday, the euro fared reasonably well against the dollar, after EU data showing a surprising strength in manufacturing and services this month held out hope the euro zone may escape recession. The single currency fetched $1.3024, little changed from late New York levels and not far off a three-week peak of $1.3063 struck on Tuesday. The Australian dollar gained 0.3 percent to $1.0518, coming close to a three-month peak of $1.0574 set earlier in the week after a stronger higher-than-expected reading of underlying inflation.