Expanding US dollar climbed to the highest point in a month against the Japanese yen, as signs of economic improvement worldwide dampened demand for safe haven assets.
USD/JPY reached a session high at 99.69 at 7:30 GMT, the pairs highest since August 2nd, after which consolidation followed at 99.52, up by 0.20% on a daily basis. Support was to be received at September 2nd low, 98.26, while resistance was to be met at August 2nd high, 99.93.
China Logistics Information Center reported that country’s manufacturing PMI increased to a reading of 51.0 in August, or the highest point in 16 months, from 50.3 in July, while experts had anticipated that the index will advance to a value of 50.6. Additionally, Chinese non-manufacturing Purchasing Managers’ Index (PMI) fell to 53.9 during August from 54.1 in July, data showed on Tuesday. Values above the key level of 50.0 usually are taken as indications for expansion. This data bolstered outlook over global economic recovery.
“Our long-term view is that there will be yen weakness,” said Derek Mumford, a director at Rochford Capital, a foreign-exchange risk-management company in Sydney, cited by Bloomberg. The currency will “inevitably weaken, particularly against the dollar with the prospect of winding back of QE in the very near future by the Fed and the very fact that the BOJ will keep printing money.”
In the mean time, market players were eyeing the ISM Manufacturing indicator out of the United States, scheduled for release later in the day, as it may prove to be the key indicator for the US central bank to start scaling back its easing. US dollar was boosted, namely because of expectations that the Federal Reserve Bank will begin tapering its asset purchases at its policy meeting on September 17-18th.
Also, Bank of Japan said today that Japanese monetary base expanded 42% in August on annual basis, or the largest increase since November 1973, to 177 trillion JPY. The national currency retreated against 14 of its 16 major peers today, as a response. The central bank currently purchases more than 7 trillion JPY of Japanese government bonds each month in order to increase the gauge of money supply to 270 trillion JPY by the end of 2014 and stoke 2% inflation. Banks policymakers are expected to hold a meeting this week.
Last but not least, another report showed earlier today that Japanese labor cash earnings rose by 0.4% in July annually, after the 0.6% gain, registered a month ago. Preliminary estimates pointed a 0.8% increase.
Elsewhere, the yen was losing ground against the euro, as EUR/JPY cross rose by 0.16% to trade at 131.27 at 8:17 GMT. GBP/JPY pair was gaining even more, 0.47% to trade at 155.16 at 8:21 GMT.
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