Forex - Japanese yen retraces after better than expected trade data

Investing.com - The yen and kiwi recovered some ground on Asia Thursday after data sets that came in better than expected.

In Japan August trade data showed a deficit of ¥948.5 billion, below a forecast of a deficit worth ¥1.029 trillion, but still the 26th straight monthly shortfall.

The New Zealand dollar recovered from an early fall on stronger than expected second quarter GDP figures and other currencies eased against the dollar as prospects for a Federal Reserve rate hike next year weighed.

New Zealand said second quarter gross domestic product rose 0.7%, above the 0.6% gain expected quarter-on-quarter, but below the Reserve Bank of New Zealand forecast of 0.8%.

NZD/USD traded at 0.8097, up 0.02%, after the data. In Australia, AUD/USD also recovered to 0.8958, up 0.02%, while USD/JPY retraced to 108.54, down 0.17%, and EUR/USD also retraced to 1.2848, down 0.08%.

Bank of Japan Governor Governor Haruhiko Kuroda is due to deliver a brief speech at 0635 to 0650 GMT. Some market speculation has build on whether he will make any remarks about the yen.

Overnight, the dollar strengthened against most major currencies after investors digested the Federal Reserve's statement on monetary policy and determined that despite dovish language, rates still remain on track to rise in 2015.

The Federal Reserve said earlier it was leaving its benchmark interest rate unchanged at 0.00-0.25% and added it would likely close its monthly bond-buying program in October.

Prior to Wednesday's policy statement, the Fed was buying $25 billion in Treasury debt and mortgage-backed securities a month to stimulate the economy, a monetary policy tool known as quantitative easing that aims to suppress long-term interest rates, weakening the dollar as a side effect.

The Fed decided earlier to trim that figure to $15 billion and will likely close it at its Oct. 28-29 meeting, which gave the dollar support.

Still, the Fed added it won't rush to raise interest rates due to headwinds still facing the labor market, dovish language that would otherwise weaken the greenback.

"On balance, labor market conditions improved somewhat further; however, the unemployment rate is little changed and a range of labor market indicators suggests that there remains significant underutilization of labor resources," the Fed said in its statement.

"It likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored."

Markets have interpreted the phrases "considerable time" and "underutilization of labor resources" as hints that policy may remain looser for longer than expected, though after digesting the statement, markets assumed the Fed remains on course to hiking interest rates in 2015, which gave the dollar support.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.04% at 84.79.

On Thursday, the U.S. is to produce a flurry of economic data, including reports on initial jobless claims, building permits, housing starts and manufacturing activity in the Philadelphia region.

Markets will also track Scotland's referendum on independence.