Forex Market: USD/JPY hovers near 10-week highs ahead of US jobs data

The Japanese yen hovered near the weakest level in ten weeks against the US dollar, ahead of a US government report that may show private payrolls rose in March, by the most in four months, while the jobless rate stood at the lowest level since October 2008.

USD/JPY hit a session high at 02:30 GMT, after which the pair trimmed earlier gains to trade little changed at 103.87, losing 0.05% for the day. Support was likely to be received at April 3rd low, 103.81, while resistance was to be met at January 23rd high, 104.84. The pair was poised for a 1% weekly gain, a third consecutive 5-day period of advances.

Dollar’s demand was heightened amid expectations a government report scheduled to be released later today may show private payrolls rose by 200 000 in March, the most in four months, according to the median experts’ forecast. Data may also show that the jobless rate stood at 6.6% last month, matching January’s reading and the weakest since October 2008. If confirmed, these data points will add to signs the US labor market is strengthening, which will back the case for further stimulus reductions.

“This time, bad weather won’t have affected the data, so expectations for a strong payrolls number are high,” said Masakazu Sato, a Tokyo-based foreign-exchange adviser at Gaitame Online Co., cited by Bloomberg. “That’s adding to the underlying strength in the dollar.”

However, data by the US Commerce Department showed yesterday that the US trade deficit widened by 7.7% to $42.3 billion, the largest since September from $39.3 billion in the previous month. Analysts had predicted that the trade deficit will narrow to $38.5 billion. The increasing gap was led by declines in exports of fuels and capital goods, while imports remained steady.

At the same time, the initial jobless claims rose by 16 000 to reach a five-week high of 326 000 in the week ended March 29, data by the US Labor Department showed. Analysts had expected the number of Americans filing for jobless benefits will increase to 317 000, after a revised 310 000 applications in the previous week, the weakest since September 7.

Meanwhile, the Bank of Japan policy makers are scheduled to hold a two-day policy meeting on April 7-8th. Officials will keep their pledge of targeting an annual increase in the money supply of 60 trillion yen to 70 trillion yen, according to all 36 economists in a Bloomberg News survey, while 44% of them predicted the central bank will expand monetary stimulus in July.

The Japanese government increased the sales-tax from 5 percent to 8 percent on April 1st, the first since 1997. Experts forecast that the nations economy may contract by 3.5% this quarter, the most since the first quarter of 2011, when the country was struck by an earthquake, followed by tsunami.

“We believe the BOJ will have to implement additional monetary easing to limit the tax hike’s impact,” Osamu Takashima, a Citigroup Inc. foreign-exchange strategist in Tokyo, wrote in an e-mailed note to clients yesterday, cited by Bloomberg. “This should increase downward pressure on JPY.”

Elsewhere, EUR/USD touched a session low at 1.3696 at 06:05 GMT, after which consolidation followed at 1.3700, losing 0.15% for the day. Support was likely to be received at February 28th low, 1.3694, while resistance was to be met at April 3rd, 1.3804.