Forexpros – The U.S. dollar moved higher against the yen on Friday, paring some of the week’s losses after finance ministers from the Group of 20 industrialized nations pledged a “strong” response to the challenges facing the global economic recovery.
USD/JPY hit 76.10 on Thursday, the pair’s lowest since August 19; the pair subsequently consolidated at 76.58 by close of trade on Friday, shedding 0.42% over the week.
The pair is likely to find support at 75.94, the low of August 19 and the pair’s all time low and resistance at 76.96, Thursday’s high.
World financial leaders said the G-20 nations are “committed to a strong and coordinated international response to address the renewed challenges facing the global economy,” after talks in Washington.
Leaders also called on the European Union to take quick action to resolve the financial crisis in the euro zone.
The statement came after warnings from the U.S. Federal Reserve and the International Monetary Fund that the global economic recovery is at risk.
After its policy setting meeting on Wednesday the Fed said there were “significant downside risks” facing the U.S. economy. The central bank unveiled a plan to trade short-term bonds for long-term ones, in an attempt to boost the economy by pushing down long-term interest rates, a move dubbed “Operation Twist.”
Earlier in the week, the IMF cut its growth forecasts for the global economy to 4% for 2011 and 2012 and said the world economy had entered “a dangerous new phase.”
Despite repeated assurances from EU officials, investors have remained concerned over the possibility of a debt default by Greece, boosting safe haven demand for the yen.
The yen hit a 10-year high against the euro on Thursday and has remained close to a record high against the dollar, prompting speculation that Japan may mount a fresh intervention to weaken the yen in order to protect its largely export driven economy.
On Friday, a senior Japanese finance ministry official said Japan cannot curb the appreciation of its currency by setting a cap on the yen, as Switzerland has done, as that would effectively mean abandoning monetary policy.
In the week ahead, developments in Greece look likely to remain in focus while investors will be closely watching U.S. data on second quarter economic growth in order to gauge the strength of the U.S. economic recovery.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, September 26
The U.S. is to produce government data on new home sales, a leading indicator of economic health.
Tuesday, September 27
The U.S. is to publish industry data on house prices, as well as a report on consumer confidence, a leading indicator of consumer spending.
Wednesday, September 28
The U.S. is to produce official data on durable goods orders, a leading indicator of production. The country is also to publish government data on crude oil stockpiles.
Thursday, September 29
Japan is to publish official data on retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity. Meanwhile, Bank of Japan Governor Masaaki Shirakawa is to speak; his comments will be closely watched by markets.
Meanwhile, the U.S. is to publish its weekly report on initial jobless claims, as well as industry data on pending home sales. The country is also to publish revised data on second quarter gross domestic product, the broadest measure of economic activity and the primary gauge of the economy’s health.
In addition, Fed Chairman Ben Bernanke is to speak; his comments will be closely watched for clues regarding future monetary policy.
Friday, September 30
Japan is to produce a string of data with reports on household spending, inflation, unemployment, housing starts and manufacturing, as well as preliminary data on industrial production.
The U.S. is to round up the week with official data on personal spending and inflation as well as a report on manufacturing activity in the Chicago area. Meanwhile, the University of Michigan is to publish revised data on consumer sentiment and inflation expectations.
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