Yen at five-year lows as inflation rises The yen hit fresh five-year lows against its main rivals this week, with the best performance against the Japanese currency coming from the pound. Japanese consumer price data on Friday continued to show the deflation-fighting policies of Prime Minister Shinzo Abe were reaping results, as the annual rate of inflation rose to 0.9 per cent in October, from 0.7 per cent in the previous month. This helped slow losses for the yen on Friday, but over the week, the yen was down 1 per cent against the dollar at Y102.24 and fell 1.4 per cent to Y139.16 against the euro. "In circumstances of aggressive monetary easing, which is coinciding with moderately higher inflation, we believe the decline in the real level of yields in Japan is a more important influence, and this points to the potential for further yen weakness," said Takahiro Sekido at Bank of Tokyo Mitsubishi UFJ. Sterling's main boost this week came on Wednesday after the second reading of third-quarter UK growth confirmed annual GDP of 1.5 per cent, driven mainly by domestic consumption. Exports, however, were weak, falling 2.4 per cent. "The much sought-after "rebalancing" of the UK economy, one that relies less on domestic consumption and more on net exports has yet to evolve," said Robert Lynch at HSBC. Market participants and policy makers should be quick to recognise that sterling's strength is impeding exports. The pound rose 1.7 per cent against the yen during the week to Y167.07. Against its larger trading partners, the pound's rise was less marked. The euro fell only 0.3 per cent in the five trading sessions to £0.8326, while the dollar lost 0.7 per cent to $1.6341. Analysts also pointed out that the Bank of England's decision this week to end its Funding for Lending Scheme for the UK mortgage market helped lift the pound. Hungary's central bank on Wednesday cut its benchmark rate by 20 basis points to 3.2 per cent and said the economic environment remained "supportive overall" for easing. The Hungarian forint fell 1.1 per cent over the week against the euro to Ft301.50, and was down 0.6 per cent to Ft221.44 against the dollar. "This is in reaction to the latest cut in interest rates, expectations of further cuts to come and concern that the cuts could be excessive," said Stephen Leach at Citigroup. The euro climbed 0.4 per cent over the week against the dollar to $1.3611.