USD/JPY losing ground as Lawrence Summers withdrew from Federal Reserve race

US dollar was losing ground against the Japanese yen on Monday, as tapering fears were raised amid the exit of former Treasury Secretary Lawrence Summers from the race to govern the Federal Reserve Bank and after US President Barack Obama said in a statement that he accepted this withdrawal.

USD/JPY fell to a session low at 98.44 during the early phase of Asian trade, after which consolidation followed at 98.86, still losing 0.40% for the day. Support was likely to be received at September 6th low, 98.53, while resistance was to be seen at September 13th high, 99.97.

US dollar was put under selling pressure against the Japanese currency, after a series of mixed data out of the United States, released on Friday. The Department of Commerce reported that retail sales in the United States rose by 0.2% in August, less than projections of a 0.5% advance. July’s sales figure was revised up to a 0.4% gain from a 0.2% gain previously.

In addition, the preliminary value of the index of consumer confidence in the United States decreased considerably in early September, reaching a reading of 76.8 compared with 82.1 in late August. The index stood at 85.1 in late July, marking the highest point since the end of recession.

President Obama had mentioned Lawrence Summers and Federal Reserve Vice Chairman Janet Yellen as potential candidates to govern the central bank, after Ben Bernanke’s term as Chairman expires on January 31st. “News that Summers had withdrawn from consideration for the Fed post has surprised the market as he had been widely tipped to take over from Bernanke,” said Imre Speizer, a market strategist at Westpac Banking Corp. (WBC) in Auckland, cited by Bloomberg. “Given that he was also perceived to be less QE-friendly than Yellen, the other main contender, the U.S. dollar has fallen.”

On the other hand, Pacific Investment Management Co.’s chief executive officer and co-chief investment officer Mohamed El-Erian said that short-term Treasuries and equities would be favored by Janet Yellen, regaining her status as “front runner.”, the same media imparted.

Market players were eyeing the two-day meeting on policy by the Federal Reserve Bank starting tomorrow, as most experts projected a possible reduction of scale of stimulus to 75 billion USD from the current monthly pace of 85 billion USD of bond purchases. Fed officials have pledged to maintain the benchmark rate close to zero at least as long as unemployment rate in the country exceeds 6.5% and inflation outlook is no more than 2.5%, with the 2% target, considered as ensuring price stability.

Markets in Japan will remain closed today for a holiday.

Meanwhile, the Japanese yen was little changed against the euro, with EUR/JPY cross adding 0.04% on a daily basis to trade at 132.09 at 7:00 GMT. GBP/JPY pair was unchanged to trade at 157.57 at 7:02 GMT.