US dollar climbed to a 4.5-month high against the Japanese yen on Friday, due to the prospect that Japanese central bank will introduce additional easing measures during 2014, which pressured demand for the yen.
Having reached highs unseen since July 8th at 101.36 at 20:15 GMT, USD/JPY cross ended the week at 101.27, gaining 0.10% for the day. The pair registered a fourth consecutive weekly advance of 1.40%. Support was likely to be received at November 21st low, 100.17, while resistance was to be seen at July 8th high, 101.50.
USD/JPY strengthened on Thursday, after at its meeting on policy Bank of Japan (BoJ) left the benchmark interest rate unchanged at the current record low level of 0.10% in consonance with expectations, as the central bank strives to achieve its 2% inflation objective in 2015.
The bank also kept its pledge to increase nation’s monetary base by 70 trillion JPY (695 billion USD) per year at the meeting, as has been projected by economists. The decision on policy came only three weeks after bank’s last meeting and has been reached after an unanimous vote. The outlook over Japanese economy has been left without change, with recovery going at a moderate pace.
Speaking in the parliament in Tokyo on Friday, Bank of Japan Governor Haruhiko Kuroda said that the yen was not “excessively weak”. The rate of inflation in the country is expected to hit BoJ’s 2% target in the latter half of the central bank’s two-year time frame, while policymakers are expected to adjust the asset-purchasing program in accordance with economic conditions. Haruhiko Kuroda reiterated that additional steps would be taken in order to accomplish banks inflationary objective.
In the mean time, the US dollar received support after the publication of the minutes of Federal Reserve Bank’s policy meeting in October on Wednesday. It revealed that central bank’s policymakers “generally expected” employment data, coming out of the United States to improve, as this would “warrant trimming the pace of purchases in coming months.”
The bank currently purchases 85 billion USD of Treasuries and mortgage-backed securities each month. According to the minutes, Federal Open Market Committee (FOMC) members also underscored that the Quantitative Easing is entirely dependent on economic data. A possible tapering of asset purchases may occur when data pointed that US economy was picking up the pace.
During the upcoming week investorsattention will be focused on the string of crucial economic data, scheduled for release out of the United States, including indicators regarding nations housing sector, consumer confidence and industry. Japan will publish data on retail sales, consumer inflation and industrial production, while Bank of Japan will release the minutes of its most recent policy meeting.
USD/JPY cross may be influenced by a number of reports, scheduled for publication during the week, as follows:
On Monday (November 25th) the National Association of Realtors (NAR) is to release a report on pending home sales in the United States for October.
On Tuesday (November 26th) Bank of Japan is expected to publish the minutes of its most recent meeting on policy, which contains banks estimate on economic conditions in the country.
The United States will release reports on building permits and housing starts for September and October, followed by the results of a survey on consumer confidence in November and a report on home prices in 20 large US cities by S&P and Case-Shiller.
On Wednesday (November 27th) the United States is expected to publish data on durable goods orders for October, accompanied by the weekly report on initial jobless claims, the index gauging business activity in the region of Chicago and the final reading of the index of consumer confidence for November by Thomson Reuters and the University of Michigan.
On Thursday (November 28th) Japan will release a report on retail sales for October, a crucial indicator providing clues for consumer spending in the country.
Markets in the United States will remain closed due to the Thanksgiving holiday.
On Friday (November 29th) Japan is to release a string of various economic data, including manufacturing activity, industrial production, index of consumer prices, household spending and unemployment rate.