Forexpros – The U.S. dollar rose to a one-week high against the yen on Friday, as solid U.S. second quarter growth data dampened expectations for fresh easing measures from the Federal Reserve, but persistent concerns over the euro zone debt crisis saw the dollar trim gains.
USD/JPY hit 78.67 on Friday, the pair’s highest since July 20; the pair subsequently consolidated at 78.44 by close of trade, unchanged on the week.
The pair is likely to find support at 77.93, Monday’s low and a six-week low and near-term resistance at 78.79, the high of July 20.
The dollar strengthened against the yen after preliminary data showing that U.S. economic growth came in broadly in line with expectations in the second quarter tempered expectations for another round of quantitative easing from the Federal Reserve at its policy meeting next week.
The Commerce Department said U.S. gross domestic product expanded by 1.5% in the three months to June, after growing by an upwardly revised 2.0% in the first quarter.
Demand for the safe haven yen was also hit by reports that European Central Bank President Mario Draghi is to meet with German central-bank head Jens Weidmann in the coming days to discuss steps to contain the debt crisis, including the purchase of Spanish and Italian bonds.
Markets rallied on Thursday, after Draghi said the ECB will do whatever is necessary to preserve the euro.
German Chancellor Angela Merkel and French President Fran?ois Hollande vowed to defend the euro in a joint statement on Friday and said that they are “deeply committed to the integrity of the euro zone.”
The comments came after the yield on Spanish 10-year bonds surged to a euro-era high of 7.7% on Wednesday, fuelling fears that the country would need a full-scale sovereign bailout, in addition to the rescue package agreed for its banks.
However, the greenback pared some of the day’s gains against the yen on Friday, as uncertainty crept back into markets, dampening expectations for any imminent moves by the ECB.
Earlier in the week, Japanese Finance Minister Jun Azumi reiterated that Tokyo was ready to take decisive action against speculative moves or excessive volatility in the yen, in order to shield the largely export based economy from the effects of the currency’s strength.
In the week ahead, investors will continue to keep a close eye on developments in the euro zone, as well as Wednesday’s monetary policy decision by the Federal Reserve. Meanwhile, Friday’s data on U.S. non-farm payrolls will be highly anticipated as market participants attempt to gauge the strength of the country’s economic recovery.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, July 30
Japan is to produce a preliminary government report on industrial production, an important indicator of economic health.
Tuesday, July 31
Japan is to release official data on household spending, one of the most important gauges of economic health, as well as a government report on average cash earnings.
The U.S. is to publish official data on personal consumption expenditures price inflation, as well as on employment costs and personal spending. The country is also to release the Standard & Poor’s / Case-Shiller house price inflation report, followed by Chicago’s purchasing managers’ index and industry data on consumer confidence.
Wednesday, August 1
The U.S. is to produce data on non-farm employment change, as well as a report on crude oil stockpiles. The Institute for Supply Management is to produce a report on manufacturing activity.
In addition, the Federal Reserve is to announce its benchmark interest rate. The announcement is to be accompanied by the bank’s rate statement, which discusses the factors affecting the bank’s policy decision and the economic outlook.
Thursday, August 2
The U.S. is to release government data on initial jobless claims and factory orders, a leading indicator of production.
Friday, August 3
The U.S. is to round up the week with government data on non-farm employment change and the country’s unemployment rate, followed by official data on average hourly earnings, as well as an ISM report on non-manufacturing activity.
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