USD/JPY edges lower on boosted safe haven demand

The Japanese yen advanced against the US dollar as equities fell, leading to a boosted demand for the safe haven currencies, such as the Japanese yen.

USD/JPY hit a session low at 101.85 at 07:20 GMT, losing 0.5% on a daily basis. At 09:04 GMT the pair traded at 102.06. Support was likely to be received at December 4th low, 101.82, while resistance was to be encountered at December 4th high, 102.83.

“The yen is very correlated with risk,” said Mitul Kotecha, global head of foreign-exchange strategy at Credit Agricole Corporate & Investment Bank in Hong Kong. “In recent days, risk barometers have been rising, which has resulted in a drop in dollar-yen.”

BoJ Governor Haruhiko Kuroda, cited by Bloomberg, said on Monday 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 after 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.

As capital spending increases and monetary base expands, this indicates that the Japanese government and BoJ policymakers are making steps in the right direction to achieve the target of a 2% inflation rate during late 2014, or early 2015.

The MSCI Asia Pacific Index of shares fell 0.3% today after a 1.2% drop on Wednesday, the most since September 30th.

Meanwhile, the greenback strengthened 4.1% this year against a basket of nine other developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, while the yen, tracked by the same indexes was the worst performer, having lost 14%.

A string of important US indicators was released yesterday, while market players were also keeping a close eye on forthcoming reports concerning US economy to further gauge, when the Fed is going to taper its stimulus program.

Automated Data Processing Inc. (ADP) released a report on the employment change in the non-farm private sector. The results outstripped the analysts’ forecasts of 170 000 new jobs added in November, with ADP coming with a result which pointed 215 000 new jobs. This is much higher than the upwardly revised number of 184 000 new jobs in October. The indicator is calculated in consonance with the same methods the Bureau of Labor Statistics uses and is published every month, two days before the official BLS employment rate statistics.

The US Bureau of Economic Analysis released a report on the US Trade Balance. Data pointed to a larger-than expected deficit, accounting for $40.641 billion in October, compared to $42.969 billion in September, which was a downward revision from $ 41.778 billion. Analysts’ projections pointed to a $40.200 billion deficit.

In addition, the Institute for Supply Management (ISM) reported that its index, gauging activity in the sector of services in the US, slowed down to a reading of 53.9 in November, after it stood at 55.4 in October. Analysts projections showed the index will decline to 55.0 in November.

A separate report showed a decline in US New Home Sales in September to 354 000, short of analysts’ estimates of 425 000 new homes sold and less than the downward revised number of 379 000 homes a month ago. However, New Home Sales increased to 444 000 in November, which is higher than the expected 430 000 and larger than September’s number.

Later today, the US GDP for the third quarter is expected to be revised upward to 3.1% from initially estimated growth of 2.8% in October.

On Friday, December 6th, the Labor Department will release the keenly anticipated data on non-farm payrolls and rate of unemployment for November. According to analysts’ projections, numbers will probably show that US employers hired 183 000 workers in November, compared to 204 000 in October. This will be the largest annual gain in payrolls since 2005. Meanwhile, the unemployment rate is projected to fall to 7.2%, the same rate as in September and the lowest since November 2008.

Elsewhere, AUD/USD fell to a session low at 0.9014 at 0:36 GMT, also the pair’s lowest point since September 3rd, after which consolidation followed at 0.9034. Support was likely to be received at September 3rd low, 0.8972, while resistance was to be met at December 4th high, 0.9138.