Forex Pros – The U.S. dollar fell to a one-month low against the yen on Friday, after U.S. Federal Reserve Chairman Ben Bernanke indicated that ultra-loose monetary policy would stay in place for the foreseeable future.
USD/JPY hit 81.03 on Friday, the pair’s lowest since March 25; the pair subsequently consolidated at 81.18 by close of trade, shedding 0.74% over the week.
The pair is likely to find short-term support at 80.70, the low of March 23 and resistance at 82.27, last Thursday’s high.
A dip below 81.00 would likely increase market jitters about further intervention from the Bank of Japan, which intervened March 18 to sell the yen in a coordinated action with other Group of Seven central banks.
In his first ever post-policy meeting press conference on Wednesday, Bernanke said that the central bank, which left interest rates unchanged, “will complete” its USD600 billion bond-buying program by the end of June but indicated that the Fed was in no rush to tighten monetary policy with the jobs market still in a “very, very deep hole.”
On Thursday, the Commerce Department said U.S. economic growth slowed to a 1.8% annual rate in the first quarter, from 3.1% in the prior three months.
Earlier in the week the yen weakened broadly after ratings agency Standard & Poor’s cut its outlook for Japan’s sovereign debt rating to negative from stable, warning that reconstruction costs following last month’s earthquake will add to what is already the world’s biggest debt load.
S&P cut Japan’s sovereign credit rating in January for the first time since 2002, saying the government had no plan to deal with its mounting debt.
Also last week, the Bank of Japan kept interest rates unchanged at record lows, in a widely expected decision.
Looking ahead, in a week that will be shortened by holidays in Japan, markets will be looking to Friday’s U.S. non-farm payrolls report to gauge the recovery in the strength of the jobs market.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, May 2
Japan is to publish official data on average cash earnings, which is closely correlated with consumer spending. Also Monday, the U.S. Institute for Supply Management is to publish its manufacturing PMI, a leading indicator of economic health.
Tuesday, May 3
The U.S. is to release government data on factory orders, a leading indicator of production. Meanwhile, markets in Japan are to remain closed for a public holiday.
Wednesday, May 4
The U.S. is to publish data on non-farm payrolls compiled by payroll processing firm ADP, which leads government data by two days. Meanwhile, the U.S. Institute for Supply Management is to publish its non-manufacturing PMI. The country is also to publish government data on crude oil stockpiles.
Markets in Japan are to remain closed for a public holiday.
Thursday, May 4
The U.S. is to publish its weekly report on initial jobless claims as well as preliminary data on labor costs and productivity. The country is also to release official data on natural gas inventories. Also Thursday, Fed chair Ben Bernanke is to speak at a public engagement, his comments will be closely watched for any clues to the future possible direction of monetary policy.
Also Thursday, markets in Japan will remain closed for a public holiday.
Friday, May 6
The U.S. is to round up the week by publishing key government data on non-farm payrolls as well as data on the country’s unemployment rate and average earnings.