A report revealing a drop in retail sales in Japan has caused the yen to fall to its lowest level against the US dollar in more than four years.

This morning the dollar traded at 121.86 Japanese yen while the dollar was at 1.9586 to the pound sterling and 1.2918 to the euro.

The fall in retail sales in Japan has added to speculation that the Bank of Japan (BoJ) may delay raising interest rates while US economic data shows a buoyant economy and a possibility of rate cuts in the US.

"Consumption in Japan is still weak. Along with the slower pace of price increases, this will make it more difficult for the BoJ to raise rates next month," Yuji Kameoka, senior economist and currency analyst at Daiwa Institute of Research in Tokyo, told Bloomberg.

Retail sales in Japan fell 0.3 per cent in December from a year earlier.

In Europe, recent news on unemployment figures, and specifically that they are not rising, has led to speculation that the euro will rise in value as pressure mounts on the European Central Bank to raise interest rates to control inflation.