USD/JPY falls after Japanese string of data

dollar-yen2US dollar traded lower against the Japanese yen on Tuesday, following the optimistic data points out of Japan, which curbed expectations that nations central bank will increase its monetary stimulus at the policy meeting on Thursday.

USD/JPY touched a session low at 97.47 at 3:05 GMT, after which consolidation followed at 97.53, down 0.16% for the day. Support was likely to be found at October 7th low, 96.66, while resistance was to be encountered at October 18th high, 98.16.

According to data by the Japanese Statistic Bureau, the unemployment rate decreased to 4.0% in September, meeting projections, after a month ago it stood at 4.1%. Septembers rate, however, remained above the registered 3.8% in July.

Household spending rose 3.7% in September on annual basis, marking the largest gain in the past six months, considerably above the expected 0.5% climb, after in August spending dropped 1.6%.

At the same time, the Ministry of Economy Trade and Industry said that Japanese retail sales increased 1.8% in September compared to August, following the 0.9% increase a month ago, while analysts had forecast a 0.5% gain in September. Annually, retail sales climbed 3.1% in September, after the 1.1% rise in August.

The MSCI Asia Pacific Index of shares dropped 0.2%, which also provided support for the yen as a safe haven currency.

Bank of Japan (BoJ) will continue to purchase bonds until it achieves its 2% inflation objective, Deputy Governor Iwata said on Sunday. Nation’s monetary and fiscal policies remained of critical importance for ending deflation. Currently BoJ buys more than 7 trillion JPN (71.8 billion USD) of Japanese government bonds per month. The central bank is expected to release updated forecasts on Japanese economic growth and inflation rate, following its policy meeting on October 31st. “The consensus is that the yen is somewhat undervalued,” Jerald Schiff, the International Monetary Fund’s mission chief for Japan, said in an interview in Tokyo, cited by Bloomberg News. “Right now we don’t think the BOJ needs to do anything different to what they are doing. They announced a quite enormous monetary accommodation, and although it may not be moving very fast, both inflation and inflation expectations are moving in the right direction.”

Meanwhile, the Federal Reserve Bank starts a two-day policy meeting today, as expectations pointed that policymakers will probably maintain the current monthly pace of stimulus.

Yesterday it also became clear that industrial output in the United States rose 0.6% in September on a monthly basis, exceeding preliminary estimates of a 0.4% gain, after production climbed 0.4% in August. However, the index of pending home sales in the country declined 5.6% in September to reach a value of 101.6, or the lowest level since December 2012. In August compared to July sales decreased 1.6%.

Later on trading Tuesday the United States will release a report on retail sales, a crucial indicator regarding the consumer spending trend and economic development as a whole. Analysts project that the total value of retail sales will remain unchanged in September compared to August, when sales increased 0.2%. Another report will show the performance of the US producer price index (PPI). The median estimate by experts point a monthly increase of 0.2% in September, after a month ago the PPI climbed 0.3%. Better than forecast results will certainly heighten the appeal of the greenback.

Elsewhere, the yen was higher against the euro, with EUR/JPY cross down 0.22% on a daily basis to trade at 134.41 at 6:44 GMT. GBP/JPY pair was losing 0.48% to trade at 156.96 at 6:46 GMT.

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