Investing.com - Mixed U.S. data sent the dollar falling against the yen on Monday, as investors sold the greenback for profits and snapped up bargain-priced yen positions, though market sentiments remained firm that monetary policies in the two countries will diverge, limiting the yen's gains.
In U.S. trading, USD/JPY was down 0.13% at 107.21, up from a session low of 107.01 and off a high of 107.37.
The pair was expected to test support at 104.90, the low from Sept. 5, and resistance at 107.39, Friday's high.
Expectations for U.S. monetary policy to tighten while Japan's loosen have firmed the dollar against the yen in recent sessions, though profit taking weakened the pair on Monday thanks in part to mixed U.S. data.
In a report, the Federal Reserve Bank of New York said that its general business conditions index increased to a five-year high of 27.5 this month from 14.7 in August. Analysts had expected the index to rise to 16.0 in September.
A separate report showed that U.S. industrial production fell 0.1% last month, disappointing forecasts for a 0.3% gain. Industrial production for July was revised down to a gain of 0.2% from a previously reported increase of 0.4%.
Still, the dollar's losses were seen limited ahead of the Fed's Wednesday statement on monetary policy.
Expectations for the U.S. central bank to cut its monthly bond-buying program to $15 billion from $25 billion cushioned the dollar's slide against the yen as did expectations for an upbeat take on the U.S. economy.
Investors were also hoping to see a timetable as to when U.S. interest rates may rise.
The yen's gains, meanwhile, were seen as limited.
Bank of Japan Governor Haruhiko Kuroda said Thursday monetary authorities would be prepared to immediately loosen monetary policy or implement other measures if its 2% inflation target becomes difficult to meet.
Recent data revealed that Japan’s second quarter economic contraction was larger than initially estimated, and another report showed that the country’s current account surplus fell short of expectations in July.
The lackluster data indicated the economy is struggling to gain momentum and fueled expectations for more stimulus from the Japanese central bank.
The yen, meanwhile, was up against the euro and up against the pound, with EUR/JPY down 0.38% at 138.67, and GBP/JPY trading down 0.39% at 173.93.
On Tuesday, the U.S. is to produce data on producer price inflation.