US dollar traded higher against the Japanese yen on Wednesday, as a White House official said that US President Barack Obama will nominate Fed Vice Chairman Janet Yellen as the next Chairman of the bank, while this news dampened demand for safe haven assets, such as the yen.
USD/JPY reached a session high at 97.47 at 6:07 GMT, after which consolidation followed at 97.28, gaining 0.43% on a daily basis. Support was to be found at October 8th low, 96.56, while resistance was to be met at August 28th high, 97.80.
The US dollar received certain support after it became clear that Federal Reserve Bank Vice Chairman Janet Yellen would probably succeed current Chairman Ben Bernanke, whose term ends on January 31st. She was also the favorite candidate, as shown in surveys of economists and had the support of 20 members of the Senate Democratic caucus, who signed a July 26th letter to President Barack Obama. Yellen has been known as one of the upholders of the unprecedented monetary stimulus program. If she is confirmed as the next Chairman, under her leadership Fed’s policy may remain accommodative for a bit longer.
However, some experts saw Yellens nomination as a threat to economic recovery. Koichi Hamada, an adviser to Prime Minister Shinzo Abe, said that a prolonged US stimulus program could strengthen the Japanese yen and obstruct the pace of economic recovery. “Yellen probably won’t seek an exit from an accommodative policy immediately,” Hamada, a former Yale University professor, said in a phone interview from Connecticut, cited by Bloomberg. “If the Fed lengthens stimulus, the yen may gain, hurting Japan’s recovery”. Hamada was one of Prime Minister Abe’s advisers on the creation of the reflationary policies, called Abenomics and on choosing a governor for the Bank of Japan, with the post taken by Haruhiko Kuroda during March this year.
In the mean time, according to the minutes of Bank of Japans most recent meeting on policy on September 4th-5th, the bank revised up its overall outlook over economy. Some of the nine members of banks Governing board noted that recovery in Japanese export was weaker than projected. They stressed that a certain improvement in business conditions for exporters and manufacturers has been observed, while weaker results were due to statistical inaccuracy. On the other hand, other members suggested that structural factors in Japan has influenced shipments from the country.
Elsewhere, the yen was lower against the euro, with EUR/JPY cross adding 0.16% on a daily basis to trade at 131.73 at 8:37 GMT. In addition, GBP/JPY pair was losing 0.15% today to trade at 155.61 at 9:39 GMT.
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