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Forex - USD/JPY dips ahead of Fed policy announcement

Published 10/29/2014, 12:08 PM
Updated 10/29/2014, 12:09 PM

Investing.com - The dollar edged lower against the yen on Wednesday as investors avoided the greenback and remained on the sidelines ahead of the Federal Reserve's announcement on interest rates and monetary policy due out later in the session.

In U.S. trading, USD/JPY was down 0.06% at 108.09, up from a session low of 107.95 and off a high of 108.24.

The pair was expected to test support at 106.22, the low form Oct. 21, and resistance at 108.38, Monday's high.

Many investors were betting that the Federal Reserve later Wednesday will announce plans to close its bond-buying program, which stands at $15 billion in Treasury and mortgage debt purchased each month.

The quantitative easing program aims to spur recovery by suppressing long-term borrowing costs with the hope companies raise capital to invest and hire, weakening the dollar as a side effect.

An end to quantitative easing has largely been priced into trading, though weeks of hit-or-miss data have many investors uncertain as to when the Fed will hike is fed funds rate in 2015.

By Wednesday trading, many were expecting the U.S. central bank to reassure markets that interest rates will remain on hold for some time to come to make sure cooling European and Chinese economies don't drag on U.S. recovery, which softened the greenback slightly.

Tuesday's data weighed on the dollar as well.

The U.S. Commerce Department reported that total durable goods orders, which include transportation items, decreased by 1.3% last month, disappointing expectations for a gain of 0.5%.

Orders for durable goods in August were revised to a decline of 18.3% from a previously reported drop of 18.4%.

Durable goods are products designed to last at three years and include trains, planes and automobiles.

Core durable goods orders, which are stripped of volatile transportation items and include components such as household appliances, eased down by 0.2% in September, defying forecasts for a 0.5% gain. Core durable goods orders rose by 0.7% in August.

Orders for core capital goods, a key barometer of private-sector business investment, fell by 1.7% last month, worse than expectations for a 0.6% increase and after rising 0.3% in August.

Shipments of core capital goods, a category used to calculate quarterly economic growth, declined 0.2% in September, disappointing forecasts for a 0.7% gain, after rising 0.1% in the preceding month.

Elsewhere, the yen shrugged off data earlier Wednesday revealing that Japanese industrial production rose 2.7% in September from a month earlier, beating forecasts.

Separately, the yen was down against the euro and down against the pound, with EUR/JPY up 0.16% at 137.96, and GBP/JPY trading up 0.09% at 174.61.

On Thursday, the U.S. is to publish revised data on third quarter GDP, as well as the weekly report on initial jobless claims. Later in the day, Fed Chair Janet Yellen is to speak at an event in Washington; her comments will be closely watched.

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