Yen Falls On Fed Rate Forecasts

23:58, 17th September 2014

(RTTNews) - The Japanese yen weakened against the other major currencies in the Asian session on Thursday after the Federal Reserve reiterated on Wednesday its pledge to keep near-zero rates in place for a "considerable time" after its bond-buying stimulus program ends.

Traders seemed pleased with the prospect as well as the central bank's assessment that "there remains significant underutilization of labor resources."

Although policy makers refrained from offering a more specific time-line for raising interest rates, the central bank reduced its monthly asset purchases to $15 billion, and said the program will likely end in October.

"If incoming information broadly supports the committee's expectation of ongoing improvement in the labor market, and inflation moving back over time towards its 2% longer run objective the committee will end this program at our next meeting," Fed Chair Janet Yellen said in a press conference explaining the decision.

Yellen said inflation has firmed some since earlier in the year and the committee believes that the likelihood of inflation running persistently below 2 percent has diminished. That's despite an unexpected drop in consumer prices in August.

In the economic news, data from the Ministry of Finance showed that Japan had a merchandise trade deficit of 948.5 billion yen in August. That beat forecasts for a shortfall of 1,028.9 billion yen following the 962.1 billion yen deficit in July. Exports fell 1.3 percent on year, beating expectations for a drop of 2.6 percent but down from the 3.9 percent jump in the previous month.

The weaker yen supported Japanese stocks. The benchmark Nikkei 225 index is currently up 164.86 points or 1.04 percent at 16,053.

Bank of Japan Governor Governor Haruhiko Kuroda is due to deliver a speech at the National Securities Industry Convention, in Tokyo at 2:35 am ET. Traders focus on his comments amid market speculation build on whether he will make any remarks about the yen.

Traders will also track the referendum on Scotland's independence later in the day.

In the New York trading overnight, the yen fell against the other major currencies.

The yen fell to a 6-year low of 176.70 against the pound, from an early high of 176.14. At yesterday's close, the yen was trading at 176.33 against the pound. If the yen extends its downtrend, it is likely to find support around the 177.00 area.

Against the U.S. dollar, the yen slipped to a 6-year low of 108.67 from an early high of 108.31. The yen is likely to find support around the 108.95 region.

Against the euro and the Swiss franc, the yen dropped to more than a 3-month low of 139.76 and a 4-month low of 115.42 from early highs of 139.13 and 114.95, respectively. The yen was quoted at 139.37 against the euro and 115.11 against the franc at yesterday's close. The yen may test support near 139.94 against the euro and 117.08 against the franc.

Looking ahead, Swiss trade data and Japan machine tool orders for August are due in the Asian session.

In the European session, U.K. Retail Sales for August and European Central Bank's Targeted Long Term Refinancing Option (LTRO) Allotment are due.

In the New York session, U.S. building permits and housing starts for August and U.S. weekly jobless claims for the week ended September 13 are due to be released.