US dollar slid to lowest point in six weeks against the Japanese yen on Wednesday, as Bank of Japan commenced its two-day meeting amid speculation it will abstain from introducing additional stimulus.
USD/JPY fell to a session low at 96.76 at 7:39 GMT, the lowest point since June 20th, after which consolidation followed at 96.93. Support was likely to be found at June 19th low, 96.19, while resistance was to be met at current session high 97.82.
“We’ve been cautious on dollar-yen and been arguing to wait for dips,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp. (WBC), Australia’s second-largest lender by market value, cited by Bloomberg. “As the boost from the collapse in the yen through the end of last year and the beginning of this year fades, that begins to pressure yen on the topside.”
It is expected that Bank of Japan will maintain its benchmark interest rate and monetary stimulus objectives at their current level at the end of its meeting on Thursday. At present the central bank purchases over 7 trillion JPY per month in government bonds in order to bolster inflation rate towards the 2% target within two years.
Japanese yen was additionally boosted as Asian shares decreased. The MSCI Asia Pacific Index of shares plunged 1.9%, while futures on the Standard & Poor’s 500 Index expiring in September dropped by 0.4%.
Meanwhile, Chicago Federal Reserve Bank Chairman Charles Evans announced that he would not rule out the withdrawal of central banks stimulus measures at the bank’s September meeting.
Elsewhere, the yen was gaining ground against the euro, as EUR/JPY cross tumbled 0.93% to trade at 128.86 at 9:10 GMT. GBP/JPY pair was losing positions even more, down by 1.05% to trade at 148.47 at 9:10 GMT. However, the Japanese currency has declined by 19% over the past 12 months, the worst performing currency of 10 developed-nation currencies, tracked by Bloomberg Correlation-Weighted Indexes. The euro advanced 10%, the best performer, while the US dollar has strengthened 2%.