Forex - USD/JPY eases off 2-1/2 year highs after Fed

Investing.com - The dollar eased against the yen on Thursday but remained close to two-and-a-half year highs after the Federal Reserve said it would maintain its easing program at the outcome of its latest policy meeting.

USD/JPY hit 90.75 during late Asian trade, the session low; the pair subsequently consolidated at 90.86, sliding 0.24%.

The pair was likely to find support at 90.32, Tuesday’s low and resistance at 91.39, Wednesday’s high and the pair’s highest since mid-June 2010.

The Fed said Wednesday that it will continue its USD85 billion a month quantitative easing program “if the outlook for the labor market does not improve substantially.”

The U.S. central bank also reiterated that it will continue to hold interest rates close to zero until the unemployment rate falls below 6.5%.

The statement came after data showed that the U.S. economy contracted 0.1% in the fourth quarter, confounding expectations for growth of 1.1% and a sharp slowdown from growth of 3.1% in the preceding quarter.

The unexpected contraction was attributed to a 6.6% decline in government spending and a significant drop in private inventories. However, consumer spending rose by 2.2% and business investment was 8.8% higher.

The yen remained broadly weaker amid expectations that Japanese Prime Minister Shinzo Abe would keep up pressure on the Bank of Japan to implement more aggressive easing measures to combat deflation.

Elsewhere, the yen pulled back from 33-month lows against the euro, with EUR/JPY down 0.31% to 123.18.

Earlier Thursday, data showed that German retail sales fell 1.7% in December, the sharpest drop in more than three years, compared to expectations for a 0.1% decline.

Germany was to publish preliminary data on consumer inflation and the change in the number of unemployed later in the session, while the U.S. was to release the weekly government report on initial jobless claims.