USD/JPY hits fresh 6-month highs on BoJ Governor’s statement

On Monday the Japanese yen reached fresh 6-month lows against the US dollar on Bank of Japan (BoJ) Governors statement of a continuing central bank quantitative easing in an attempt to achieve a stable 2% rate of inflation.

USD/JPY reached a session high at 102.67 at 8:32 GMT, gaining 0.20% for the day. On Friday, USD/JPY reached the highest level since May 23rd, to trade at 102.61. Support was likely to be found at November 29th low, 102.12, while resistance was to be seen at May 23rd high, 103.56.

On Monday, the Japanese Finance Ministry reported that capital spending rose 1.5% in the third quarter, from a year earlier. The indicator calls for the change in the value of the new capital expenditures made by the business during the present quarter, compared to the same quarter the previous year. Capital spending is a key indicator for economic growth and is a fundamental part of the GDP. When capital expenditures rise, there are signs of corporate growth, which drives Japanese economic growth.

Meanwhile, BoJ Governor Haruhiko Kuroda, cited by Bloomberg, said today in the city of Nagoya that the central bank will continue easing monetary policy until the 2% inflation rate becomes stable and will monitor the impact of the yen’s correction on small companies.

Japan is in a process of recovery from the 15-year period of deflation. Bank of Japan has been purchasing more than 7 trillion JPY (68.4 billion USD) of government bonds each month in its struggle to achieve 2% inflation in two years since April.

According to Commodity Futures Trading Commission report, leveraged funds increased their net-short yen positions, in the week ended November 19th, to its highest level since the week ended March 12th. The number of net-short yen positions, or those that are betting on a Japanese currency decline, reached 76 878 in the week ended November 19th.

“If yen selling accelerates into London trading, I think we can break into the 103-per-dollar level,” said Toshiya Yamauchi, cited by Bloomberg. Yamauchi is a senior analyst in Tokyo at Ueda Harlow Ltd., a company which provides margin-trading services.

Investors are awaiting the statement of Federal Reserve Chairman Ben Bernanke in Washington later in the day. At 15:00 GMT the Institute of Supply Management (ISM) is scheduled to release final data on manufacturing activity in the United States for November. ISM will probably report that its index of manufacturing activity fell to a value of 55 in November from 56.4 in the previous month, which was the highest level since April 2011, according to the median estimate of economists participated in a survey by Bloomberg.

On Friday, December 6th, the United States will release the keenly anticipated data on non-farm payrolls and rate of unemployment for November, which according to analysts projections will be reach 183 000 in November, after a reading of 204 000 in October.

According to Todd Elmer, a currency strategist in Singapore at Citigroup Inc., cited by Bloomberg, “The data out of the U.S., the ISM and, of course, the payrolls on Friday, is probably going to be the more important focus for the market. If we see another 200-plus number, I think that the market is going to bring forward its taper expectation.”

Last month Federal Reserve minutes pointed that the Federal Reserve officials may reduce their $85 billion in monthly bond purchases “in coming months” as the economy improves.

Elsewhere, AUD/USD climbed to a daily high at 0.9168 at 7:10 GMT on Monday, after which the pair consolidated at 0.9160, gaining 0.54% for the day. Support was likely to be received at November 29th low, 0.9056, while resistance was to be encountered at November 26th high, 0.9204. The Aussie was gaining against the euro as well, with EUR/AUD cross down 0.42% on a daily basis to trade at 1.4853 at 7:50 GMT.