An agreement on a two-year U.S. budget deal was also seen as removing an obstacle to the winding back of monetary stimulus.
USD/JPY rose to 103.92, the highest level since October 2008 and was last down 0.15% to 103.19.
The dollar pulled back from highs as investors locked in profits, while data showing that U.S. producer price inflation fell 0.1% in November sparked concerns over the sluggish inflation outlook.
The soft inflation data did little to alter expectations that the Fed will begin withdrawing stimulus in the next few months after the latest U.S. nonfarm payrolls report showed that the U.S. economy added more jobs than expected in November.
The yen remained under heavy pressure on the view that the Bank of Japan will have to increase the size of its asset-purchase program in the coming year in order to meet its target of 2% inflation by 2015.
EUR/USD fell to 1.3710, the weakest level since December 9 and was last down 0.09% to 1.3739.
The euro also scaled five year peaks against the yen on Friday, withEUR/JPY rising to 142.83, the highest level since October 2008, before pulling back to 141.81, ending the session 0.27% lower.
Meanwhile, Australia’s dollar ended the week close to three month lows against the U.S. dollar after the country’s central bank Governor Glenn Stevens said the bank wanted to see the Aussie’s exchange rate closer to 0.85 U.S. cents in order to support the economy.
AUD/USD hit lows of 0.8908, the weakest level since August 30, and was last up 0.33% to 0.8965. For the week, the pair dropped 1.33%.
In the week ahead, investors will be focusing on Wednesday’s outcome of the Fed’s monthly policy meeting, and a press conference with Chairman Ben Bernanke will be closely watched.
The euro zone is to release data on manufacturing and service sector activity, while the ZEW index of German economic sentiment will be keenly awaited. In addition the BoJ is to hold what will be its final policy meeting of the year.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, December 16
Japan is to release data on manufacturing and service sector activity. Meanwhile, China is to produce preliminary data on the closely watched HSBC manufacturing index.
The euro zone is to publish data on manufacturing and service sector activity, while Germany and France are to publish individual reports. Germany’s central bank is to publish its monthly report.
The U.K. is to release private sector data on industrial order expectations.
Canada is to publish a report on foreign securities purchases.
The U.S. is to release reports on industrial production, manufacturing activity in the New York region and the balance of foreign and domestic investment in U.S. securities.
Tuesday, December 17
The Reserve Bank of Australia is to publish the minutes of its latest policy meeting, which contain valuable insights into economic conditions from the bank’s perspective. The nation is also to publish a report on an index of leading economic indicators as well as a report on new vehicle sales.
The U.K. is to release data on consumer price inflation, which accounts for the majority of overall inflation.
The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health. The euro zone is to publish data on consumer inflation.
Canada is to produce data on manufacturing sales, a leading indicator of economic health.
The U.S. is to release data on consumer inflation and the current account.
Wednesday, December 18
Japan is to release data on the trade balance, the difference in value between imports and exports.
New Zealand is to produce private sector data on business confidence, a leading indicator of economic health.
The Ifo Institute is to publish a report on German business climate, a leading indicator of economic health.
The Bank of England is to publish the minutes of its most recent policy setting meeting. The U.K. is to release data on the change in the number of people employed and the unemployment rate.
The ZEW Institute is to publish a report on economic expectations in Switzerland, a leading indicator of economic health.
Canada is to produce data on wholesale sales, a leading indicator of consumer spending.
The U.S. is to release data on building permits, a leading indicator of future construction activity, and housing starts.
The Federal Reserve is to announce its federal funds rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision. The U.S. central bank is also to publish its economic projections for the next two years. The rate announcement is to be followed by a press conference with Chairman Ben Bernanke.
Later Wednesday, New Zealand is to release data on third quarter gross domestic product, the broadest indicator of economic activity and the leading indicator of economic growth.
Thursday, December 19
The euro zone is to release data on the current account.
The U.K. is to produce report on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
The U.S. is to publish data on existing home sales, manufacturing activity in the Philadelphia region and initial jobless claims.
Friday, December 20
The BoJ is to announce its benchmark interest rate and publish its monetary policy statement, which outlines economic conditions and the factors affecting the bank’s decision. The announcement is to be followed by a press conference.
Germany is to release data on producer price inflation, as well as private sector data on consumer climate.
The U.K. is to publish revised data on third quarter GDP and reports on public sector net borrowing and the current account.
Canada is to release data on consumer inflation and retail sales.
The U.S. is to round up the week with revised data on third quarter GDP.
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