Investing.com - The dollar strengthened against the yen on Wednesday ahead of the release of the Federal Reserve's October policy meeting minutes due out later in the session, which many expect will contain a somewhat bullish take on U.S. recovery.
In U.S. trading, USD/JPY was up 0.72% at 117.71, up from a session low of 116.82 and off a high of 117.78.
The pair was expected to test support at 115.44, Monday's low, and resistance at 117.78, the session high.
Investors were looking ahead to the minutes of the Fed’s October meeting, which were expected to highlight the growing monetary policy divergence between the U.S. central bank and its peers in Japan and Europe.
The Fed’s October policy statement noted that both the labor market and the inflation outlook were improving.
Markets are currently expecting the U.S. central bank to start raising rates sometime around September 2015. In contrast, the Bank of Japan and the European Central Bank are expected to continue monetary easing in order to shore up growth and inflation.
The yen remained under heavy selling pressure one day after Japanese Prime Minister Shinzo Abe announced plans to delay a sales tax hike due to take place next year after an increase in April played a part in pulling Japan into a recession.
He also called elections for December to seek a fresh mandate for his economic policies, which call for a weaker yen.
The decision came after data revealed that Japan’s economy fell back into recession in the third quarter, contracting by an annualized 1.6% after a 7.3% contraction in the previous quarter.
The yen showed little reaction after the Bank of Japan left monetary policy on hold on Wednesday, as widely anticipated.
Elsewhere in the U.S. on Wednesday, the U.S. Commerce Department reported earlier that the number of building permits issued last month increased by 4.8% to 1.080 million units from September's revised total of 1.031 million.
Analysts expected building permits to rise by 0.9% to 1.040 million units in October.
The report also showed that U.S. housing starts fell by 2.8% last month to hit 1.009 million units from September’s total of 1.038 million units, compared to expectations for a drop to 1.025 million.
Separately, the yen was down against the euro and down against the pound, with EUR/JPY up 0.87% at 147.73, and GBP/JPY trading up 0.93% at 184.40.
On Thursday, Japan is to publish data on the trade balance, while the U.S. is to release data on initial jobless claims, consumer prices, existing homes sales and manufacturing activity in the Philadelphia region.