The euro trimmed losses against the yen on Tuesday, as risk aversion waned after official data showed that U.S. producer price inflation rose more-than-expected in September to record the largest increase in five months.
EUR/JPY pulled back from 104.78, the pair’s lowest since October 12, to hit 105.22 during European afternoon trade, still down 0.24% over the day.
The pair was likely to find support at 104.18, the low of October 12 and resistance at 106.56, the high of October 13.
The U.S. Labor Department said producer prices rose 0.8% last month after a flat reading in August and above expectations for a 0.2% gain.
However, the report said the increase in inflation was in large part due to surging gasoline prices, which were unlikely to spark a broad increase in inflation pressures.
The euro remained under pressure after Moody’s placed France’s triple-A credit rating on review and after a report earlier showed that an index of German economic sentiment fell to a three-year low this month.
The ZEW Centre for Economic Research said that its index of German economic sentiment fell to minus 48.3 October from a reading of minus 43.3 in September.
It was the eight consecutive monthly decline in the index and the lowest level since November 2008, adding to fears over a recession in the euro zone’s largest economy.
Analysts had expected the index to decline to minus 45.0 in October.
The report came a day after hopes for a comprehensive solution to the euro zone’s financial woes were quashed after Germany’s finance minister said the October 23 European Union summit would not provide a “definitive solution” to the region’s debt crisis.
The euro was also lower against the U.S. dollar, with EUR/USD slipping 0.16% to hit 1.3713.
Later in the day, Federal Reserve Chairman Ben Bernanke was due to speak at an event in Boston.