Investing.com - The dollar fell to fresh two-week lows against the yen on Thursday, a day after Japan delayed a planned sales tax increase, fueling speculation that the country is shifting away from monetary easing towards fiscal stimulus.
USD/JPY was down 0.48% to 109.01, the weakest level since May 18.
The yen continued to gain ground after Japanese Prime Minister Shinzo Abe said Tuesday he was planning to delay a scheduled sales tax hike amid ongoing weakness in the economy. He also announced plans to implement a fiscal stimulus package later this year.
The announcement raised speculation over a shift away from monetary easing by the Bank of Japan as a way to spur growth.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.26% at 95.17.
The dollar remained on the back foot after mixed U.S. economic reports added to doubts over whether the Federal Reserve will raise interest rates in June.
The Institute of Supply Management said Wednesday that its manufacturing index expanded for a second month in May.
The report came after a similar survey by research group Markit showing that U.S. factory activity slowed slightly in May, hitting the lowest level since September 2009.
A separate report showed that U.S. construction spending posted the largest monthly decline since January 2011 in April.
Investors were turning their attention to Friday’s U.S. nonfarm payrolls report for May for fresh indications on the strength of the labor market.
The U.S. was to release data on ADP nonfarm payrolls and initial jobless claims later Thursday.
U.S. central bank chief Janet Yellen said last week it could be appropriate raise rates in the coming months if the economy and the labor market continue to pick up as expected, fueling expectations for a near-term rate hike.
The Fed hiked interest rates in December for the first time in almost a decade.
Higher rates are positive for the dollar because they make the U.S. currency more attractive to yield-seeking investors.
The euro pushed higher against the dollar, with EUR/USD rising 0.15% to 1.1206 ahead of the European Central Bank’s policy meeting later in the day.
The ECB was not widely expected to make any changes to monetary policy, but some analysts were expecting the bank to raise its forecasts for inflation and growth.
The single currency was lower against the yen, with EUR/JPY sliding 0.29% to 122.19.