USD/JPY cut earlier gains after Bernanke’s testimony

US dollar traded on lower levels against the Japanese yen on Friday, after the second day of the testimony by Federal Reserve Bank Chairman Ben Bernanke and the decline in Asian shares ahead of the upper-house elections of Japanese parliament on July 21st.

USD/JPY fell to a session low at 99.89 at 5:38 GMT, after which consolidation followed at 100.10. Support was likely to be found at July 17th low, 99.04, while resistance was to be encountered at July 10th high, 101.19.

Federal Reserve Chairman Ben Bernanke said in front of the Senate Banking Committee on Thursday that it was “way too early to make any judgment” as to whether bond purchase tapering will begin this September. He delivered his semi-annual report on monetary policy to the panel after his statement to the House Financial Services Committee the previous day, according to which the central bank will take a wait-and-see stance, regarding monetary stimulus.

The MSCI Asia Pacific Index of shares dropped by 0.5%, which also gave a certain boost to yens demand.

The Japanese currency lost as much as 0.4% against the US dollar earlier, because according to government data Japanese investors purchased a net 1.11 trillion JPY of foreign bonds during last week, which was the largest purchase since the period ended on September 28th, Bloomberg reported.

Additionally, Japanese Prime Minister Abe’s Liberal Democratic Party and its coalition partner New Komeito were about to win more than 65 of the 121 upper-house seats being contested, according to a poll published in the Nikkei newspaper on July 17th, Bloomberg imparted. A victory in this vote will grant the parties control of both chambers of the parliament and also the ability for Abe to implement a three-pronged plan of monetary easing, fiscal stimulus and deregulation.

Taking a look at the economic data, that came out from Japan earlier on Friday, it is vital to mention that All Industries Activity Index advanced 1.1% in May on a monthly basis, slightly mismatching preliminary estimates of an increase by 1.2%, and improving further in comparison with April, when the index added 0.1%, a revision down from a 0.4% advance previously. Data showed that activity in construction jumped by 5.2% in May, neutralizing the registered 0.1% drop during the preceding month. Industrial production increased by 1.9% in May on a monthly basis, accelerating in comparison with the preceding month, when the indicator added 0.9%. Speaking in annual terms, activity in Japanese industry recorded a rate of increase over two times larger in May, compared to April, 1.2% versus 0.4%.

Japans Leading Index also showed a higher value in May, rising to 110.7 from 110.5 a month ago, while initial estimates pointed this index will remain unchanged at 110.5. Last but not least, the final reading of Japanese Coincident Index increased during May, reaching 106.0, as a month ago it stood at 105.9.

Meanwhile, the yen traded steadily against the euro, as EUR/JPY cross ticked up 0.04% to 131.73 at 8:13 GMT. GBP/JPY pair also showed stability, dipping by 0.02% to 152.91 at 8:14 GMT.