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Yen Resurfaces from 5-year Lows on Bargain Hunting

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Yen Resurfaces from 5-year Lows on Bargain Hunting

The Japanese yen eased from a five-year low against the US dollar amid speculation the Federal Reserve could begin reigning in record stimulus next week.

Bargain hunters put their speculation on hold and loaded up on favourably priced yen shortly after the USDJPY pair reached 103.93. The pair has traded to the upside over the past month as market participants size the impact of Abenomics on the world’s third largest economy. The Bank of Japan is determined to maintain ultra-loose monetary policy in order to bring inflation closer to the desirable 2 percent target.

The USDJPY was down more than 0.3 percent to 103.23. The trend index remains bullish, as the pair remains well supported below the 1.03 handle. Supports are ascending from 102.32, 102.57 and 102.83. Initial resistance is located at 103.84, followed by 104.10 and 104.35.

In economic news, Japanese industrial output expanded 5.4 percent in the 12 months to October, up from 5.1 percent a month earlier. On a monthly basis, output rose 1 percent, exceeding forecasts.

In the United States, the prices of goods used in the early stages of production rose at a slower pace than expected, according to the Labor Department’s monthly Producer Price Index.

Abenomics has helped shave nearly 25 percent off the value of the Japanese yen over the previous 12-month period. Heading into 2014, the yen will be at the mercy of US monetary policy. The markets have tied their expectations about US dollar pairs to monetary policy. With the BOJ unlikely to change its stance in the near-term, all eyes will be on the Federal Reserve. The Fed’s gradual unwinding of record stimulus is widely expected to propel the US dollar forward in 2014. Economists polled by Bloomberg believe the Fed will begin reigning in record stimulus by March.

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