Investing.com - The dollar rose to the highest level since October 2008 against the yen on Friday, on speculation the Bank of Japan will have to expand its stimulus program in the coming months, while prospects of further stimulus tapering by the Federal Reserve underpinned the dollar.
USD/JPY rose to 105.19, the highest level since October 3, 2008, before settling at 105.16, ending the session 0.35% higher and up 1.87% for the week.
The pair is likely to find support at 104.63, the low of December 27 and resistance at 106.14, the high from October 3, 2008.
In Japan, hit-or-miss data weakened the yen against its major counterparts. Official data released on Friday showed that consumer price inflation rose at an annualized rate of 1.2% in November, up from 0.9% in October.
A separate report showed that Tokyo's core consumer price inflation, which excludes fresh food, rose at an annualized rate of 0.7% in December, after a 0.6% rise the previous month.
Meanwhile, household spending inched up 0.2% in November compared to a year earlier, significantly below expectations for a 1.7% gain. Preliminary government data also showed that industrial production in Japan ticked up 0.1% last month, disappointing expectations for a 0.4% increase.
In addition, data showed that Japan's retail sales rose 4% in November on year, above expectations for a 2.9% gain. October's retail sales rose 2.3%.
Demand for the greenback remained supported amid expectations of further stimulus tapering by the Federal Reserve. The U.S. central bank will start reducing its bond-buying stimulus program by USD10 billion a month in January, amid indications of an improving U.S. economy.
Elsewhere, the yen dropped to a five-year low against the euro, with EUR/JPY rising to 145.69 after European Central Bank Governing Council member Jens Weidmann said keeping interest rates low may endanger political reforms.
According to Germany’s Bild newspaper, Weidmann said low inflation shouldn’t be used to justify loose monetary policy. "We must take care to raise interest rates again in a timely manner should inflation pressures build," he reportedly added.
In the week ahead, the U.S. is to publish reports on pending home sales, consumer confidence and jobless claims, as investors attempt to gauge the strength of the world’s largest economy.
Trading volumes are expected to remain light, with many markets closed for the New Year’s holiday, reducing liquidity in the market and increasing the volatility.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, December 30
The U.S. is to release private sector data on pending home sales, a leading indicator of economic health.
Tuesday, December 31
Markets in Japan will remain closed for New Year’s Eve. Meanwhile, the U.S. is to produce private sector data on consumer confidence and house price inflation, as well as a report on manufacturing activity in the Chicago region.
Wednesday, January 1
Markets in Japan and the U.S. will remain closed for the New Year’s holiday.
Thursday, January 2
Markets in Japan will remain closed for a bank holiday.
In the U.S., the Institute of Supply Management is to release its manufacturing PMI, while the Labor Department is to release its weekly report on initial jobless claims. The country is also to publish data on construction spending.
Friday, January 3
Markets in Japan will remain closed for a bank holiday. The U.S. is to round up the week with official data crude oil stockpiles and natural gas inventories.
USD/JPY rose to 105.19, the highest level since October 3, 2008, before settling at 105.16, ending the session 0.35% higher and up 1.87% for the week.
The pair is likely to find support at 104.63, the low of December 27 and resistance at 106.14, the high from October 3, 2008.
In Japan, hit-or-miss data weakened the yen against its major counterparts. Official data released on Friday showed that consumer price inflation rose at an annualized rate of 1.2% in November, up from 0.9% in October.
A separate report showed that Tokyo's core consumer price inflation, which excludes fresh food, rose at an annualized rate of 0.7% in December, after a 0.6% rise the previous month.
Meanwhile, household spending inched up 0.2% in November compared to a year earlier, significantly below expectations for a 1.7% gain. Preliminary government data also showed that industrial production in Japan ticked up 0.1% last month, disappointing expectations for a 0.4% increase.
In addition, data showed that Japan's retail sales rose 4% in November on year, above expectations for a 2.9% gain. October's retail sales rose 2.3%.
Demand for the greenback remained supported amid expectations of further stimulus tapering by the Federal Reserve. The U.S. central bank will start reducing its bond-buying stimulus program by USD10 billion a month in January, amid indications of an improving U.S. economy.
Elsewhere, the yen dropped to a five-year low against the euro, with EUR/JPY rising to 145.69 after European Central Bank Governing Council member Jens Weidmann said keeping interest rates low may endanger political reforms.
According to Germany’s Bild newspaper, Weidmann said low inflation shouldn’t be used to justify loose monetary policy. "We must take care to raise interest rates again in a timely manner should inflation pressures build," he reportedly added.
In the week ahead, the U.S. is to publish reports on pending home sales, consumer confidence and jobless claims, as investors attempt to gauge the strength of the world’s largest economy.
Trading volumes are expected to remain light, with many markets closed for the New Year’s holiday, reducing liquidity in the market and increasing the volatility.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, December 30
The U.S. is to release private sector data on pending home sales, a leading indicator of economic health.
Tuesday, December 31
Markets in Japan will remain closed for New Year’s Eve. Meanwhile, the U.S. is to produce private sector data on consumer confidence and house price inflation, as well as a report on manufacturing activity in the Chicago region.
Wednesday, January 1
Markets in Japan and the U.S. will remain closed for the New Year’s holiday.
Thursday, January 2
Markets in Japan will remain closed for a bank holiday.
In the U.S., the Institute of Supply Management is to release its manufacturing PMI, while the Labor Department is to release its weekly report on initial jobless claims. The country is also to publish data on construction spending.
Friday, January 3
Markets in Japan will remain closed for a bank holiday. The U.S. is to round up the week with official data crude oil stockpiles and natural gas inventories.