US dollar was trading close to seven-week lows against the Japanese yen on Thursday due to safe heaven demand boost for the Japanese currency, amid continuing uncertainty over the future of Federal Reserves stimulus program.
USD/JPY fell to a session low at 96.08 at 6:44 GMT, the pairs lowest point since June 19th, after which consolidation followed at 96.20. Support was expected at June 19th low, 94.82, while resistance was to be seen at current session high, 96.95.
Earlier today Bank of Japan (BoJ) announced that there was an unanimous vote in favor of leaving the course of monetary policy unchanged at banks meeting today. BoJ also kept its forecast that economy will recover moderately. The monetary base in the country was to grow by 60-70 trillion JPY annually, while the massive asset purchases by the bank were to continue as planned, as announced in April this year. Japanese government bond purchases, according to banks policymakers, were to increase by an annual rate of near 50 trillion JPY. Additionally, consumer prices in the country have begun to rise and inflationary expectations tend to be rising as a whole. BoJs assessment of risks remained the same as during the preceding month.
Additionally, Japanese current account showed lower surplus in June than expected, amounting to 0.336 trillion JPY instead of 0.396 trillion JPY, following a surplus of 0.541 trillion JPY a month ago. Seasonally adjusted numbers showed the same picture, a surplus of 0.646 trillion JPY in June compared to the expected 0.727 trillion JPY. In May the recorded surplus was 0.623 trillion JPY.
It also became clear, that Japans Eco Watchers Current Index marked its fourth consecutive monthly decline, falling to 52.3 during July from 53.0 in June. This was a result of diminished demand for luxury goods and weaker sales in universal stores during the summer period, despite increased sales of drinks due to hot weather. Japanese government confirmed its statement that these July figures pointed a moderate economic recovery.
Meanwhile, US dollar came under pressure, as recent economic data from the United States fueled the uncertainty over the future of Federal Reserve’s monthly asset purchases. Chicago Federal Reserve Bank Chairman Charles Evans said that he would not rule out the withdrawal of central bank’s stimulus measures at the bank’s meeting in September. This way he echoed the remarks made by Dennis Lockhart, the president of the Federal Reserve for Atlanta on Tuesday.
Japanese yen was trading slightly lower against the euro, as EUR/JPY cross ticked up 0.07% to trade at 128.58 at 8:35 GMT. GBP/JPY pair was also gaining for the day, up by 0.06% to trade at 149.33 at 8:36 GMT.
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