Forexpros – The U.S. dollar slumped against the traditional safe haven yen on Friday, as concerns over political uncertainty in the euro zone and speculation that the Federal Reserve may implement more easing measures to support growth weighed.
USD/JPY hit 79.74 on Wednesday, the weekly high; the pair subsequently consolidated at 78.68 by close of trade on Friday, down 1.15% on the week.
The pair is likely to find support at 77.98, the low of June 4 and a almost four month low and resistance at 79.74, last Wednesday’s high.
The yen remained well supported after the Bank of Japan left rates unchanged and decided not to extend or increase any of its monetary easing measures at its policy setting meeting on Friday.
In its rate statement, the central bank noted a “high degree of uncertainty” over the sovereign debt crisis in the euro zone and the momentum toward recovery in the U.S. economy.
BoJ Governor Masaaki Shirakawa also pledged to ensure the country’s banking system remains stable, indicating that the central bank is ready to inject liquidity into the banking system, in the event of fresh market turmoil following Sunday’s elections in Greece, which may determine if the country remains in the euro zone.
Meanwhile, concerns over elevated Spanish and Italian borrowing costs lingered on Friday, despite efforts to insulate Madrid from the effects of the ongoing sovereign debt crisis by agreeing on a EUR100 billion aid package for Spanish banks.
The yield on Spanish 10-year bonds eased back to settle at 6.87% on Friday, but remained close to the critical 7% threshold which prompted bailouts in Greece, Ireland and Portugal.
The greenback was weighed by growing expectations that the Federal Reserve may announce fresh stimulus measures following its meeting next week after a recent string of weak economic data.
Data on Friday showed that U.S. consumer sentiment fell to a six-month low in June, fuelling concerns that economic growth is faltering. Separate reports showed that an index of manufacturing activity in New York dropped sharply in June, while U.S. manufacturing output fell in May for the second time in three months.
In the week ahead, investor sentiment is likely to be decided by the outcome of Sunday’s elections in Greece, while a G-20 summit due to start Monday may produce fresh measures to combat the crisis in Europe.
Meanwhile, market participants will be closely watching the outcome of the Federal Reserve’s monetary policy meeting on Wednesday.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets. The guide skips Friday, as there are no relevant events on this day.
Monday, June 18
Leaders from the Group of 20 nations are to begin a two-day summit in Mexico.
Tuesday, June 19
The U.S. is to publish official reports on building permits, an excellent gauge of future construction activity, as well as data housing starts, a leading indicator of economic health.
Meanwhile, leaders from the Group of 20 nations are to hold a second day of talks at a summit in Mexico.
Wednesday, June 20
The BoJ is to produce the minutes of its June policy meeting. Japan is also to release government data on the trade balance, which is the difference in value between imported and exported goods.
Later Wednesday, the Federal Reserve is to announce its benchmark interest rate and publish its rate statement and economic projections. The data is to be followed by a press conference with Fed Chairman Ben Bernanke to discuss the monetary policy decision. The U.S. is also to release government data on crude oil stockpiles
Thursday, June 21
The U.S. is to produce government data on unemployment claims, followed by preliminary data on manufacturing activity and an industry report on existing home sales. The country is also to release data on manufacturing activity in the Philadelphia area.
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