Dollar Rises Against Yen On Mixed U.S. Data

The greenback strengthened against the Japanese yen on Thursday as the mixed U.S. economic data showed the Federal Reserve needs more time before it starts to reduce its stimulus measures.

Versus the Japanese yen, although the greenback dropped briefly to 97.58 in Asian morning trade, the pair rose strongly to 98.38 in European morning due to the rally in Nikkei index. Later, despite dollar's brief but sharp retreat to 97.83 in New York morning after the release of U.S. jobless claim and personal income, price climbed to a high of 98.57 due to the upbeat U.S. pending home sales before retreating in U.S. afternoon.

U.S. initial jobless claims came in at 346K, versus than the forecast of 345K whilst personal income in May came in at 0.5%, better than the expectation of 0.2%, previous reading is revised to 0.1%. U.S. pending home sales in May was released at 6.7% m/m, better than the forecast of 1.0%.

The single currency traded narrowly in Asia and edged lower to 1.3012 in European morning. Despite brief rise to 1.3050 in New York morning, dollar's broad-based strength due to the better-than-expected U.S. pending home sales pressured the pair to 1.3000 before staging a strong rebound to 1.3058 at New York midday.

Although the British pound rose briefly to 1.5346 in Asian morning, the pair fell sharply to 1.5264 after the release of the worse-than-expected U.K. final GDP (0.3% m/m and 0.3% y/y, versus the forecasts of 0.3% and 0.6%) and dropped further to 1.5241 in New York morning due to active cross selling of sterling versus euro. Price eventually hit a fresh 3-week low at 1.5201 before staging a recovery on short-covering.

In other news, Fed's Dudley said 'QE3 would continue at higher pace for longer than Bernanke's timeline if growth, labor market miss FOMC forecast; timeline for withdrawal of QE3 depends on economic outlook, not calendar dates; economic conditions could "diverge significantly" from FOMC's expectations.' Fed's Dudley said 'tighter financial markets can hurt economic recovery, but economic data more important; Bernanke was "very clear" on how Fed will react to economic data. ' Fed's Lockhart said 'pace of Fed bond buying depends on economy; no predetermined pace of reductions and no fixed end point; if economy evolves as he envisions, position that it needs not quite as much stimulus fully supportable; expects inflation to rise gradually toward Fed's target but bears closing monitoring.'

Data to be released on Friday:

Japan unemployment rate, CPI, industrial production, retail sales, housing starts, construction orders, manufacturing PMI, U.K. Gfk consumer confidence, France PPI, Italy, HICP, PPI, Swiss KOF indicator, Germany CPI, HICP, Canada GDP, PPI, U.S. Chicago PMI, University of Michigan consumer confidence.