Forexpros – The U.S. dollar slumped to a three-month low against the yen on Friday, as safe haven demand remained supported by concerns over the debt crisis in the euro zone, while disappointing U.S. data also weighed.
USD/JPY hit 79.12 on Thursday, the pair’s lowest since February 17; the pair subsequently consolidated at 78.99 by close of trade on Friday, shedding 1.22% on the week.
The pair is likely to find support at 78.17, the low of February 15 and resistance at 79.45, Friday’s high.
Demand for the yen remained supported as fears over the possibility of a Greek exit from the euro zone dominated market sentiment, after cross party talks aimed at forming a coalition government failed, forcing another round of elections.
On Friday, an opinion poll in Greece indicated that pro-bailout party, New Democracy was leading the polls ahead of the fresh elections, due to be held on June 17.
Meanwhile, concerns over the health of Spain’s banking system and the prospect of more state bailouts for lenders saw the country’s borrowing costs climb above 6% last week. On Thursday, ratings agency Moody’s cut the credit ratings of 16 Spanish banks.
In the U.S., Wednesday’s minutes of the Federal Reserve’s May meeting indicated that several policymakers remained open to further efforts to stimulate the U.S. economy if growth falters or if the risks to the economy became great enough.
Data on Thursday showing that manufacturing activity in the Philadelphia-region contracted for the first time in eight months in May added to concerns over the pace of the U.S. economic recovery.
The Federal Reserve Bank of Philadelphia said that it’s manufacturing index dropped by 14.3 points to minus 5.8 in May from the previous months reading of 8.5.
Analysts had expected the index to rise by 1.5 points to 10.0 in May.
A separate report showed that the number of people who filed for unemployment assistance in the U.S. in the week before last held steady at a seasonally adjusted 370,000, confounding expectations for a decline of 5,000 to 365,000.
On Friday, Japan’s Finance Minister Jun Azumi said the government was stepping up its monitoring of speculative moves in the currency market as the yen showed signs of “volatile” movement, indicating that fresh intervention measures remain a possibility.
In the week ahead, investors will be eyeing the outcome of Wednesday’s Bank of Japan policy setting meeting, amid speculation that the central bank may enlarge its asset purchase program in order to shore up growth.
Market participants will also be awaiting U.S. data on manufacturing orders, as they attempt to gauge the strength of the U.S. recovery.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets. The guide skips Monday, as there are no relevant events on this day.
Tuesday, May 22
The U.S. is to release industry data on existing home sales, a leading indicator of economic health.
Wednesday, May 23
Japan is to produce government data on the trade balance, the difference in value between imported and exported goods. In addition, the BoJ is to announce its benchmark interest rate; the announcement will be followed by a closely watched press conference with bank chief Masaaki Shirakawa.
The U.S. is to produce government data on new home sales, a leading indicator of economic health, as well as data on crude oil stockpiles.
Thursday, May 24
The BoJ is to publish its monthly report on economic and financial developments.
Also Thursday, the U.S. is to release official data on durable goods orders and a report on initial jobless claims, both leading indicators of economic health.
Friday, May 25
Japan is to release official data on consumer price inflation both in Tokyo and nationally.
The U.S. is to round up the week with revised data from the University of Michigan on consumer sentiment and inflation expectations.
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