USD/JPY falls on safe haven demand for the yen

US dollar was losing ground against the Japanese yen on Wednesday, after the weaker than expected data on US non-farm payrolls triggered safe haven demand for the Japanese currency.

USD/JPY reached a session low at 97.27 at 4:30 GMT, also the pairs lowest point since October 6th, after which consolidation followed at 97.39, falling 0.77% for the day. Support was likely to be received at October 6th low, 97.14, while resistance was to be encountered at October 21st high, 98.25.

The Department of Labor in the United States reported on Tuesday, that employers in the country added fewer than projected job positions in the month of September, which suggested that new hiring slowed down. The private sector added 148 000 jobs in September, below preliminary estimates of 180 000 positions, and following the revised 193 000 new jobs in August up from 169 000 previously. On the other hand, the rate of unemployment decreased to 7.2% in September, marking its lowest level since November 2008, from 7.3% in August.

Following these data points, the Federal Reserve Bank will probably maintain the current pace of its stimulus program until March next year, a survey of experts showed. The central bank, contrarily to expectations, abstained from reducing the scale of the 85 billion USD per month of asset purchases at its most recent policy meeting in September, as it wanted more evidence of economic recovery to be obtained.

“The market is turning to the quantitative easing trade as tapering gets pushed back to possibly March next year,” said Masato Yanagiya, the head of foreign exchange and money trading in New York at Sumitomo Mitsui Banking Corp., cited by Bloomberg. “The dollar is coming under some selling pressure.”

In addition, the number of people in the United States who continue to receive jobless benefits probably climbed by 11 000 to reach 2.87 million during the week ended on October 12th, according to the median estimate of economists participated in a survey by Bloomberg News. A separate survey projected that initial jobless claims decreased by 18 000 to 340 000 during the week ended on October 19th. US Labor Department is expected to release the official report on claims on Thursday.

Meanwhile, the Japanese yen was boosted, as it tends to find strength in times of economic and/or financial instability, because Japan does not rely on foreign capital in order to fund its deficits.

On October 25th an official government report will likely reveal that Japanese index of consumer prices, excluding prices of fresh food, increased 0.7% during September on annual basis, according to preliminary estimates. The rate of inflation climbed to 0.8% in the month of August, recording the largest increase since November 2008.

The MSCI Asia Pacific Index of shares dropped 0.2%, after having risen as much as 0.5% previously.

Elsewhere, the yen was advancing against the euro as well, with EUR/JPY cross falling 0.87% on a daily basis to trade at 134.09 at 6:44 GMT. GBP/JPY pair was losing even more, plunging 1.16% for the day to trade at 157.52 at 6:46 GMT.