USD/JPY snaps three-day gains after Bank of Japan minutes

US dollar snapped a three-day advance against the Japanese yen on Tuesday, after the minutes of Bank of Japans (BoJ) most recent policy meeting revealed that some policymakers saw greater downside risks to nations economy, while the majority saw a balanced risk.

USD/JPY fell to a daily low at 101.34 at 0:20 GMT, after which consolidation followed at 101.43, losing 0.25% for the day. Support was likely to be found at November 25th low, 101.14, while resistance was to be encountered at November 25th high, 101.92, which was also the highest point since May 29th.

According to the minutes of Bank of Japans meeting in October, central bank board member Sayuri Shirai said that “attention should be paid to the downside risks” to the bank’s outlook report as “there was a high degree of uncertainty regarding developments in overseas economies and households’ employment and income situation”.

At the same time, Bank of Japan board member Takehiro Sato said that downside risks to weaker prices were somewhat higher than the upside, while Takahide Kiuchi called again for greater price target flexibility.

Policymakers at Bank of Japan are “somewhat tentative and cautious,” said Callum Henderson, the global head of currency research at Standard Chartered Plc in Singapore, cited by Bloomberg News. “Our expectation is for further gradual gains in dollar-yen, but it’ll be a slow grind rather than a dramatic move higher.”

The minutes release came one day after Bank of Japan Governor Haruhiko Kuroda said that bank’s 2% inflation target was quite an ambitious goal, given the fact the country has experienced 15 years of deflation. Despite that Kuroda saw a significant progress towards this objective, while Japanese economy was recovering at a moderate pace. At the international financial forum in Tokyo Kuroda said that central bank’s target could be reached sometime late in the fiscal year through 2014 or early in 2015.

On November 21st at its meeting on policy Bank of Japan decided to keep the benchmark interest rate unchanged at the current record low level of 0.10% in consonance with expectations, while also keeping its pledge to increase nation’s monetary base by 70 trillion JPY (695 billion USD) per year.

USD/JPY cross will probably slide to 100.00 by December 31st, according to the median estimate of experts, participated in a survey by Bloomberg.

Meanwhile, in the United States, yesterday it became clear that pending home sales fell for a fifth consecutive month in October due to higher mortgage rates and fewer homes available for sale in the country. According to a report by the National Association of Realtor’s (NAR), the index, gauging pending home sales, decreased 0.6% to reach a value of 102.1 in October, or the lowest level since December 2012, after another 4.6% drop in September, a revision up from a drop of 5.6% previously. Experts’ expectations have been confounded, as they pointed a 2.0% gain.

Later on Tuesday the United States will release reports on building permits and housing starts for September and October. In case projections are exceeded, the US dollar will certainly receive a boost to its demand.

At 14:00 GMT, S&P and Case-Shiller will publish data regarding home prices in 20 large cities in the United States. The annualized rate of increase in prices probably continued in September, with the corresponding index gaining 12.97%, after it rose 12.82% in August.

One hour later the Conference Board research group is scheduled to announce the results of its most recent survey on consumer confidence in the US. The gauge probably advanced to a reading of 72.1 in November from 71.2 a month ago.

Elsewhere, the yen was trading steadily against the euro, with EUR/JPY cross gaining 0.04% for the day to trade at 137.50 at 8:10 GMT. GBP/JPY pair was down 0.07% to trade at 164.18 at 8:12 GMT.