The Japanese yen declined to the lowest level in a 6-1/2 months against the greenback, following increased odds for a Fed taper on FOMCs December 17-18th policy meeting amid shrinking Japanese activity in the services sector.
USD/JPY reached a session high at 103.39 at 06:59 GMT. The pair snapped daily gains to trade at 103.25 by 07:57 GMT, losing 0.02% for the day. Support was likely to be received at December 9th low, 102.89, while resistance was to be encountered at May 23rd high, 103.56.
On Tuesday, the Japanese Ministry of Economy, Trade and Industry reported an unexpected decline in its Tertiary Industry Activity Index. The key indicator, which is tightly related to Japans Revenue base and consumer confidence fell by 0.7% in October, while initial estimates showed that the index will rise by 0.1% this month, compared to a 0.2% decline in September. The Tertiary Industry Activity Index is a leading indicator for the Japanese economy as it gauges expenses in services sector, which employs almost half of the nations workers.
Meanwhile, the US dollar was supported by yesterdays statement by the President of the Federal Reserve Bank of St. Louis, James Bullard, who said that odds of trimming bond purchases had increased amid gains in the labor market.
James Bullard, said, cited by Bloomberg: “A small taper might recognize labor-market improvement while still providing the committee the opportunity to carefully monitor inflation during the first half of 2014. Should inflation not return toward target, the committee could pause tapering at subsequent meetings.”
Last Friday, a report showed the US unemployment rate reached a 5-year low of 7.0% in November, which increased bets for earlier-than-expected Fed tapering.
“We’re still riding the Friday numbers, we’re just getting clarity and listening to the Fed speakers.”, said Fabian Eliasson, head of U.S. currency sales in New York at Mizuho Financial Group Inc. cited by Bloomberg.
Market players awaited the FOMCs next policy meeting, at which the Fed officials may trim the bond purchasing program. The next FOMC meeting will be held on December 17-18th.
Elsewhere, AUD/USD slid to a session low at 0.9076 during the early phase of Asian trade, after which consolidation followed at 0.9096, losing 0.16% for the day. Support was likely to be found at December 5th low, 0.9004, while resistance was to be met at December 9th high, 0.9130.