USD/JPY higher after Chinese non-manufacturing sector slowed down momentum in September

US dollar traded higher against the Japanese yen on Tuesday, as HSBC said that Chinese non-manufacturing PMI slowed down in September but remained in the zone of expansion, while this news neutralized to a certain extent the influence that the partial US government shutdown has caused on the pair.

USD/JPY rose to a session high at 97.17 at 6:23 GMT, after which consolidation followed at 97.08, gaining 0.40% for the day. Support was likely to be received at current session low and also the lowest point in eight weeks, 96.56, while resistance was to be met at October 4th high, 97.47.

According to data by HSBC, the index, gauging business activity in Chinese sector of services, dropped to a reading of 52.4 in September from 52.8 a month ago. Values above the key level of 50.0 are usually considered as a signal that activity in the sector has expanded. Experts from HSBC said that the performance of the services sector was stabilizing at a faster pace in Q3 in comparison with Q2, as this, added to the fact that manufacturing sector in China has been expanding at a moderate pace, suggested that overall economic activity in the country pointed a moderate growth.

Additionally, a separate report revealed that the surplus on Japanese seasonally adjusted current account widened at a lesser pace than expected in August, reaching 0.352 trillion JPY instead of 0.644 trillion JPY. In July the surplus figure amounted at 0.333 trillion JPY. Japanese yen tumbled from its strongest level in eight weeks against the US dollar, following the release of this data.

On the other hand, Japans trade balance registered an almost equal deficit to the one initially projected. The deficit shrank to 0.885 trillion JPY in August from 0.943 trillion JPY in July, while experts had anticipated a deficit of 0.880 trillion JPY.

In the mean time, investors remained still wary in their decision how to position in the market, as so far little progress has been made regarding the budget crisis in the United States. US President Barack Obama challenged congressional Republicans to increase the nation’s debt limit by next week and said that he was willing to negotiate on fiscal matters once that is done and government funding is restored.

This news came after on Sunday Republican House Speaker John Boehner said that the House will not support bills in favor of a complete re-activation of the government or raise the US debt limit unless agreement on spending cuts with the Democrats was reached.

Federal Reserve Bank President for Dallas, Richard Fisher said on Monday that the United States “cannot afford to default” and that debt ceiling talks “will come down to the wire.” Default was “unthinkable,” and “no one will ever trust us again,” Fisher, who does not vote on Feds monetary policy this year, said in Dallas, cited by Bloomberg News.

Elsewhere, the Japanese yen was losing positions against the common currency, with EUR/JPY cross rising 0.33% on a daily basis to trade at 131.78 at 8:51 GMT. GBP/JPY pair was also up for the day, gaining 0.13% to trade at 155.91 at 8:53 GMT.