Forexpros – The U.S. dollar was down against the yen on Wednesday, falling below the level that prompted Japanese officials to intervene in the currency market last week, after the Federal Reserve pledged to keep rates at ultra-low levels for an extended period.
USD/JPY hit 76.47 during late European morning trade, the lowest since August 1; the pair subsequently consolidated at 76.64, retreating 0.42%.
The pair was likely to find short-term support at 76.28, the low of August 1 and a four-month low and resistance at 77.85, Tuesday’s high.
The Federal Reserve pledged on Tuesday to keep its benchmark interest rate at an all-time low, adding that it will maintain a loose monetary policy until “at least through mid-2013.”
In a statement, the Fed said growth was much slower than expected and the labor market had deteriorated, underlining concerns over the U.S. economic outlook.
“The FOMC now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually” from the July level of 9.1%, the statement said.
The Fed also indicated that it “discussed the range of policy tools available to promote a strong economic outlook recovery in a context of price stability” and said it was prepared to employ the tools “as appropriate”.
The yen’s strength prompted Japanese Finance Minister Yoshihiko Noda to say that he would continue to closely watch movements in the currency market.
Speaking in parliament earlier, Noda said that “Recent one-sided movements in the currency market risk hurting the economy’s recovery from the earthquake,” reiterating comments made last week the country intervened to stem the yen’s strength.
Noda added that he was in contact with leaders from the Group of Seven nations about foreign exchange rates, a possible sign that Tokyo was considering further measures to curb gains in the yen.
The yen was also higher against the euro, with EUR/JPY shedding 0.37% to hit 110.22.
Later in the day, the U.S. was to produce data on the federal budget balance as well as reports on crude oil stockpiles and wholesale inventories.
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