US dollar traded slightly lower against the Japanese yen on Friday, following the decision by Bank of Japan (BoJ) to leave its benchmark interest rate unchanged at its monthly meeting.
USD/JPY slid to a session low at 96.98 at 6:00 GMT, after which consolidation followed at 97.03, losing 0.26% for the day. Support was likely to be found at August 28th low, 96.88, while resistance was to be met at October 1st high, 98.72.
Bank of Japan maintained the pace of its monetary stimulus, following a two-day policy meeting in Tokyo that ended today, as was expected by all 35 economists, participated in a survey by Bloomberg. In April banks Governor Haruhiko Kuroda proposed a plan to purchase more than 7 trillion JPY (72 billion USD) of bonds per month in order to achieve 2% inflation in 2 years. “The BOJ may be inclined to expand monetary stimulus again in early 2014 to cushion the negative impact of the planned sales tax hike,” Alvin Liew, a senior economist at United Overseas Bank Ltd. (UOB) in Singapore, wrote in a research note, cited by the same media. “We still expect a weaker yen.” The central bank also maintained its view that nations economic recovery was going at a moderate pace. BOJ has revised up its estimate regarding capital expenditures of companies in the country, because of the observed positive effects by the aggressive monetary policy measures used in banks struggle with deflation.
In the mean time, the greenback was still under pressure, because of the partial US government shutdown. President Barack Obama said that there was only “one way out” of this situation for Republican House Speaker John Boehner – to allow a vote on a stopgap spending bill without conditions, Bloomberg reported. The US Treasury Department warned in a report on Thursday that failure to lift the debt ceiling could have “the potential to be catastrophic”, as this could cause credit markets to freeze and the value of the US dollar to decrease.
Additionally, Fed President for Atlanta Dennis Lockhart said yesterday that the insufficient economic data would tend to introduce caution among Fed policymakers whether to trim the pace of asset purchases. The first partial US government shutdown in 17 years has caused a delay in releasing some crucial economic reports this week, including the monthly non-farm payrolls and the official unemployment rate, scheduled for release today.
More selling pressure for the US currency came after the Institute for Supply Management (ISM) reported on Thursday that its index, gauging business activity in the sector of services, unexpectedly fell to a reading of 54.4 in September from 58.6 in August. The median estimate by experts pointed a drop to 57.0.
Elsewhere, the Japanese yen was higher against the euro, with EUR/JPY cross down by 0.19% for the day to trade at 132.22 at 7:13 GMT. GBP/JPY pair was losing 0.37% to trade at 156.59 at 7:14 GMT.