US dollar reached a one-week high against the Japanese yen on Thursday, after the release of minutes of Feds most recent meeting, while at the same time, Chinese manufacturing PMI rose more than anticipated in August.
USD/JPY climbed to a session high at 98.42 at 8:09 GMT, also the pairs highest since August 15th, after which consolidation followed at 98.19, up by 0.52% for the day. Support was likely to be found at August 21st low, 97.11, while resistance was to be encountered at August 15th high, 98.64.
The released minutes of Federal Reserve’s most recent meeting showed that policymakers were “broadly comfortable” with Chairman Ben Bernanke’s time frame to begin asset purchase tapering this year, if the economy improves, with a few officials saying a reduction might be necessary soon. “Almost all committee members agreed that a change in the purchase program was not yet appropriate,” and a few stated that “it might soon be time to slow somewhat the pace of purchases as outlined in that plan,” according to the minutes of the Federal Open Market Committee’s July 30-31st meeting released yesterday. Recent economic data out of the United States was described as “mixed” in the minutes, so it is understandable that tapering the easing program may be delayed, if economic development still showed weak results.
“The U.S. economy is slowly strengthening and tapering will occur and, regardless of the timing, both of those lend support to the U.S. dollar,” said Hans Kunnen, a senior economist at St. George Bank Ltd. in Sydney, cited by Bloomberg.
Meanwhile, Chinese manufacturing PMI was reported to have advanced to a four-month high, showing a reading of 50.1 in August, outpacing preliminary estimates of a value of 48.2. The index stood at 47.7 in June. This data eased concerns over a possible slow down in worlds second largest economy and thus, curbed demand for safe haven assets, such as the Japanese yen.
Elsewhere, the yen tumbled against the euro, as EUR/JPY cross soared 0.80% for the day to trade at 131.51 at 8:30 GMT. Earlier today it became clear that Advance Manufacturing PMI in France remained in the contraction zone, standing at 49.7 in August, the same level as in July, while estimates pointed a reading of 50.2. French Advance Services PMI fell to a reading of 47.7 in August from 48.6 in July, while experts had anticipated that the index will advance to 49.2. Additionally, Euro zones Advance Manufacturing PMI improved to 51.3 in the month of August from 50.3 a month ago, outperforming expectations of a value of 50.7. Advance Services PMI in the common currency bloc rose to 51.0 in August from 49.8 in July, again above the expected reading of 50.2.
Ultimately, the greenback has advanced 5% during this year, or the best performing currency following the euro among the 10 developed-nation currencies, tracked by Bloomberg Correlation-Weighted Indexes. The euro has risen 6.5%, while the Japanese yen retreated 8.7%.
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