US dollar extended gains against the Japanese yen on Thursday, following the FOMC decision to leave current loose monetary policy intact and not giving indications when it considers to begin tapering its asset purchases.
USD/JPY climbed to a session high at 98.77 at 7:00 GMT, the highest point since July 26th, after which consolidation followed at 98.66, still up by 0.76% for the day. Support was likely to be found at July 31st low, 97.58, while resistance was to be encountered at July 26th high, 99.36.
At its two-day meeting ended yesterday the Federal Open Market Committee introduced no changes in the course of monetary policy, leaving interest rates at its current level close to zero. The statement provided no new indications on the conditions for maintaining the pace of bond purchases and repeated the pledge that policymakers have made to continue stimulus until the jobs outlook in the country has improved considerably. In the mean time economic growth was going at a “modest” pace. However, it was not mentioned when the central bank will begin a scale back of its bond purchases.
On the other hand, speculation that the Federal Reserve may consider tapering its stimulus program as soon as September continued, especially after recent upbeat economic reports from the United States. On Wednesday the Bureau of Economic Analysis reported that the advance value of US Gross Domestic Product grew at a larger rate than projected during the second quarter of the year, at an annual rate of 1.7%, while experts had projected that economy will expand by 1.0%. Another report said that the private sector in the United States added 200 000 new job positions in the month of July, surpassing preliminary estimates of 180 000 jobs, as this indicator provides certain clues on the development of non-farm payrolls in the United States, which will be announced on Friday.
Meanwhile, the yen was sliding against most of its major peers, following a report to show that Japanese investors sent funds into foreign bonds for a fourth consecutive week, while Asian stocks soared on better-than-projected Chinese manufacturing PMI.
“The yen is being sold as stock gains boost risk appetite,” said Kumiko Gervaise, an analyst at Gaitame.com Research Institute Ltd. in Tokyo, cited by Bloomberg. “The net buying of foreign bonds by Japanese investors certainly doesn’t help the yen either.”
The MSCI Asia Pacific Index of shares increased by 0.9%, rebounding from a 1.2% drop on Wednesday. Additionally, Japanese Topix index advanced 2.1% today.
Chinese Purchasing Managers’ Index in manufacturing came in at 50.3 in July, compared with the 49.8 median forecast, and after June’s 50.1 reading. Values above the 50.0 level mean an expansion in the sector.
Elsewhere, the Japanese yen was losing ground against the euro, as EUR/JPY cross added 0.26%, trading at 130.57 at 8:05 GMT. GBP/JPY pair was also on positive territory, up by 0.46% to trade at 149.59 at 8:06 GMT.