USD/JPY trades higher after Japanese trade balance report

US dollar gained ground against the Japanese yen on Monday, following the release of Japanese trade balance data, which revealed that export growth slowed, while Bank of Japan Governor Haruhiko Kuroda pledged to maintain stimulus in order to achieve steady inflation.

USD/JPY reached a session high at 98.13 at 6:20 GMT, after which consolidation followed at 98.07, rising 0.29% for the day. The pair was likely to receive support at October 9th low, 96.81, while resistance was to be encountered at October 18th high, 98.14.

On Monday Japanese Ministry of Finance said that the country registered a record deficit of 0.932 trillion JPY in September on its trade balance, following a deficit at the amount of 0.963 trillion JPY in August, while experts had projected that the deficit will shrink to 0.919 trillion JPY. This data posed a new challenge to nations Prime Minister Abe, who is struggling to maintain a viable economic growth. Exports rose 11.5% in September on annual basis, marking the slowest rate of increase during the past three months. In August it climbed 14.6%, while experts had anticipated that the indicator will rise 15.6%. On the other hand, import figure jumped 16.5% during the same month. Japan recorded a deficit on its trade balance for the fifteenth consecutive month, something unseen since the start of statistical record back in 1979.

At the same time, Japanese all industries activity index climbed 0.3% in August, after the 0.4% gain a month ago, while estimates pointed a 0.2% increase.

In addition, Bank of Japan will continue its quantitative easing until the rate of inflation remains stable at the 2% target, set by the bank and considered as providing stability in prices, according to Governor Haruhiko Kuroda, who spoke today at a central bank branch managers’ meeting in Tokyo.

The Japanese currency snapped a two-day gain, also as Asian shares climbed. The MSCI Asia Pacific Index of stocks gained 0.2%, following a 0.7% climb at the end of last week.

“The yen is probably leading the way as far as losses versus the dollar are concerned,” said Sacha Tihanyi, a senior currency strategist at Scotiabank in Hong Kong, cited by Bloomberg. “Equities are doing a bit better. We haven’t seen a turn in the trade balance, which is a little bit concerning”.

In the mean time, the Federal Reserve Bank will probably put off the first cut to its asset-purchasing program until March, according to the median estimate of 40 experts participated in a survey by Bloomberg, conducted on October 17th-18th. Survey results a month ago showed that the first cut of stimulus would occur in December this year. Such projections came after the experienced 16-day partial shutdown in the United States. Federal Reserve policymakers had pledged that since December a raise in the base interest rate would not be considered as long as the unemployment rate in the country exceeds 6.5%. The rate of unemployment remained at 7.3% in September, according to the median estimate in another poll. The US Labor Department will release its official report on October 22nd.

Later in the day, the United States will show data on existing home sales. Expectations pointed a 3.3% decrease to annual 5.30 million units in September, after the reported 5.48 million units in August. Better sales results will certainly provide support to the greenback.

Elsewhere, the yen was lower against the euro, with EUR/JPY cross gaining 0.12% on a daily basis to trade at 134.08 at 7:21 GMT. GBP/JPY pair was also gaining, up 0.24% to trade at 158.60 at 7:23 GMT. The US dollar has decreased in value 3.5% during the past three months, or the worst-performing currency among 10 developed-nation currencies, which are tracked by Bloomberg Correlation-Weighted Indexes. The euro has gained 0.9% during the same period, while the Japanese yen has fallen 0.6%.