Forexpros – The U.S. dollar was down against the yen on Wednesday, continuing to trade below levels that prompted the Bank of Japan to intervene in the currency market, as the disappointing outcome of the previous day’s Franco-German summit meeting boosted demand for safe haven assets.
USD/JPY hit 76.50 during European morning trade, the lowest since August 11; the pair subsequently consolidated at 76.56, declining 0.3%.
The pair was likely to find support at 76.29, the low of August 11 and resistance at 77.09, the high of August 15.
Tuesday’s meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy failed to ease concerns over the euro zone’s ongoing sovereign debt crisis.
The two leaders proposed a new council to improve the governance of the euro zone and planned to introduce a financial transaction tax in September.
But they fell short of increasing the region’s bailout fund, which many feel is inadequate should the debt crisis spread to Italy, Spain or France.
They also rejected issuing euro bonds, saying that the bonds will not solve the single currency bloc’s debt issues, disappointing investors who had been anticipating such an action.
With the yen continuing to strengthen against the greenback in recent days, traders speculated at what level Japanese officials will step in to the currency market to stem gains in the currency.
On Monday, Japanese Finance Minister Yoshihiko Noda sharpened his verbal warnings to markets, saying that he will continue to “closely watch the markets and take bold action if it becomes necessary.”
Noda also warned that the yen’s strength posed as a downside risk to the Japanese economic recovery.
Japan intervened to curb the yen’s gains for the first time since March on August 4. In addition, the BOJ announced additional monetary easing to further bolster growth, pledging to buy more assets such as stocks and bonds.
Elsewhere, the yen was also up against the euro, with EUR/JPY shedding 0.07% to hit 110.57.
Later in the day, the U.S. was to publish official data on producer price inflation, as well as government data on crude oil stockpiles.
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