Forex - Dollar rises to session highs against yen

Shutterstock photo
Shutterstock photo

Shutterstock photo - - The dollar climbed to session highs against the yen on Monday, re-approaching last week's almost six year peaks as weak Japanese economic data indicated that the economy is faltering.

USD/JPY was up 0.20% to 105.29, not far from Friday's highs of 105.69, the most since April 2009.

The pair was likely to find support at the 105.00 level and resistance at around 105.70.

Data on Monday showed that Japan's gross domestic product shrank by an annualized 7.1% in the second quarter, compared to a preliminary estimate for a 6.8% contraction.

The report underlined concerns that the impact of a sales tax increase in April was larger than expected. Business spending fell 5.1% in the three months to June, while household spending dropped 10.4% on a year-over-year basis.

The weak data indicated that the Bank of Japan is likely to stick to a loose monetary policy stance. In contrast, the Federal Reserve is expected to wind up its asset purchase program in October and to start raising interest rates sometime in mid-2015.

The dollar weakened against the yen on Friday after data showed that the rate of U.S. jobs growth slowed in August.

The U.S. economy added 142,000 jobs last month, disappointing expectations for jobs growth of 225,000. The unemployment rate ticked down to 6.1% from 6.2% in July as more workers left the labor force.

But the dollar's losses were held in check after other economic reports earlier last week indicated that the U.S. recovery is still on track.

Elsewhere, the yen slipped lower against the euro, with EUR/JPY rising 0.16% to 136.30.

In the euro zone, data on Monday showed that economic confidence deteriorated sharply this month, despite the European Central Bank's latest measures to shore up growth and inflation in the region.

The Sentix index of investor confidence tumbled to -9.8 this month, the lowest reading since July 2013, down from 2.7 in August.

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