Forexpros – The dollar rose against the yen on Wednesday as strong factory data out of the U.S. quelled market talk the Fed may considering stimulating the U.S. economy at the dollar’s expense.
In Asian trading on Wednesday, USD/JPY hit 80.13, up 0.05%, up from a low of 80.05 and off a high of 80.27.
The pair sought to test support at 79.74, the low from April 30, and resistance at 81.69, the high on April 25.
The U.S. Institute for Supply Management reported that its April manufacturing purchasing managers’ index surged to 54.8 in April, from 53.4 in March and well above market forecasts for a reading of 53.0.
The news put an end to market talk that the Federal Reserve would jolt the economy via quantitative easing, a monetary stimulus tool with which the Fed buys bonds from banks, injecting liquidity into the economy to encourage investment and hiring while weakening the dollar in the process.
Disappointing consumer spending, unemployment and gross domestic product figures have fueled expectations that the U.S. central bank would consider stimulating the economy via quantitative easing, which is used when interest-rate cuts alone won’t ensure price stability and optimal unemployment rates.
Federal Reserve Chairman Ben Bernanke has said he cannot rule out quantitative easing, but Tuesday’s manufacturing data put expectations for such at bay.
Meanwhile, several high-ranking Federal Reserve officials who vote on monetary policy appeared in public in the U.S. prior to Asia’s Wednesday opening stating the economy doesn’t need such measures right now.
The news sent the dollar gaining ground on waning expectations for Fed easing, although demand for stocks in Asia tempered the greenback’s gains.
The yen, meanwhile, traded weaker on Chinese factory data.
The China Manufacturing Purchasing Managers Index rose to a 13-month high to 53.3 in April from 53.1 in March.
The number fell slightly below forecasts for a reading of 53.6.
The yen, meanwhile, was down against the pound and up against the euro, with GBP/JPY up 0.12% and trading at 130.08 and EUR/JPY down 0.08% and trading at 105.94.
Later Wednesday in the U.S., the ADP National Employment Report will provide a glimpse of private-sector employment and serve as a precursor to Friday’s official jobs report.
