Asian markets took a beating following an earlier dip in US factory output and poorer than expected earnings. The dollar was against the ropes as the yen strengthened to levels that had traders plotting moves if the Bank of Japan decided to intervene in the currency markets. With the Nikkei 225 hitting a one month low of -2.86% on the day, the yen firmed across the gamut, adding to the woes of Japanese exporters. USD/JPY dipped a pip under the 87.00 big figure to tie a fresh low for the 2010 trading year. Today’s 86.99 low is the third time the pair has tested the level in July, and that low will remain a key support level for the near term. The yen posted a 14 year low of 84.84 late in December of 2009.

The yen crosses drifted in favor of the yen, with the EUR/JPY dipping under 112.30, GBP/JPY just falling shy of the 134.00 big figure, and AUD/JPY posting a low just south of 76.10. With the fear of a slowing US economy the Yen may still have a bit more strengthening to go adding to the chagrin of the Bank of Japan.

The EUR/USD remained just off of two month highs of 1.2953 posted earlier in New York trading in response to Philly Fed Manufacturing data coming in at 5.1 versus a 10.2 forecast. The single European currency remained mostly between 1.2900 and 1.2935 for the session, quite a jump from levels nearer to 1.2710 seen just 24 hours ago. The Aussie dollar softened by almost a handle to 0.8750 on the poor performance of Asian equities combined with signs that the US economy is stalling in the midst of recovery.

This week ends with further US data that may help pave either gains or further losses for the greenback. Tomorrow sees US CPI data and University of Michigan Consumer Sentiment as well as a continuation of earnings reports out of Wall Street. Have a nice weekend…