USD/JPY maintained losses on safe haven demand

Japanese yen managed to keep gains against the US dollar on Wednesday, due to concerns that budget talks in Washington may lead to a federal government shutdown, which bolstered demand for safe haven currencies, such as the yen.

USD/JPY fell to a session low at 98.38 at 8:32 GMT, after which consolidation followed at 98.54, losing 0.22% for the day. Support was to be received at September 2nd low, 98.36, while resistance was to be met at September 24th high, 99.16.

The Senate of the United States was to conduct a test vote today on legislation passed by the House of Representatives to cover federal spending through December 15th, that cuts off money for President Barack Obama’s health-care law. With government funding set to expire on October 1st (a date which marks the beginning of the next fiscal year) and the Treasury expected to lose its ability to borrow funds in mid-October, federal offices have begun considering the possibility of a shutdown.

“While it’s likely that the U.S. will reach a budget deal in the end, the uncertainty surrounding it in the meantime has fueled risk aversion,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London, cited by Bloomberg. “The dollar and the yen tend to be supported in an environment where investors are paring back on risky assets.”

The MSCI Asia Pacific Index of shares dropped 0.2% overnight, adding to another 0.6% decrease recorded on Tuesday. The Standard & Poor’s 500 Index fell 0.3% yesterday, marking its fourth day on negative territory.

Meanwhile, the Japanese yen was slightly gaining against the euro, with EUR/JPY cross down by 0.07% for the day to trade at 132.98 at 9:05 GMT. GBP/JPY pair was losing 0.30% to trade at 157.59 at 9:05 GMT. The US dollar has erased 1.8% of its value during the past month, or the largest decline among the 10 developed-nation currencies, tracked by Bloomberg Correlation-Weighted Indexes. At the same time, the euro has lost 1%. During the year so far, the US dollar advanced 2.9%, the common currency has gained 5.4%, while the Japanese yen has plunged 11%.