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    Asian Session – Yen firmer as oil retreats after rise in US inventories

    The Japanese yen gained across the board in Asian trading on Friday as the oil rally fizzled out and investors turned to safe havens. The dollar slipped below 113 yen to touch a low of 112.70 before rebounding slightly to 112.92 yen. The euro also lost ground, dropping to a 2½-year low of 125.37 yen.

    Crude oil futures fell on Thursday after US inventories rose by more than expected for the week ending February 12. US oil futures fell below $31 a barrel but managed to hold above $30, while Brent crude was last trading around $34 a barrel.

    The dollar was stuck near yesterday’s lows and got little boost from better-than-expected weekly jobless claims. Hawkish comments from San Francisco Fed President John Williams also did not make much impact on the greenback. Williams said on Thursday that the US economy is “looking pretty good” even after the recent market developments and that his outlook hasn’t altered much since December.

    The euro came under pressure yesterday after the ECB’s monetary policy accounts of the January meeting revealed the governing council was unanimous with the stance to “review and possibly reconsider” policy in March. The single currency dipped to a 2-week low of 1.1070 dollars yesterday but managed to bounce back to 1.1125 dollars in today’s Asian session. However, it is still set to end the week lower against the dollar, having drifted downwards since last Friday.

    Weaker-than-expected German PPI figures out this morning had little impact on the euro.

    Also under pressure is sterling as the UK’s renegotiation with the EU is underway at an EU summit in Brussels. There were no signs of an agreement early on Friday but a deal is expected to be reached later today.

    The pound failed in its attempt to break above 1.44 dollars yesterday and was trading at 1.4330 dollars on Friday. The British currency received some support today from comments by Bank of England MPC member Martin Weale. Speaking in a newspaper interview, Weale said he would be surprised if the Bank of England waited as long as 2019 as implied by the markets to raise interest rates.

    Coming up later today, the pound is likely to stay in focus with the release of UK retail sales data and news out of the UK-EU talks. US and Canadian inflation figures should also attract some attention in the US session.

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