Investing.com - The dollar firmed against the yen on Monday after data revealed Japan has officially entered a recession, though the Japanese currency took back some of its earlier losses.
In U.S. trading, USD/JPY was up 0.16% at 116.47, up from a session low of 115.46 and off a high of 117.06.
The pair was expected to test support at 113.84, last Monday's low, and resistance at 117.06, the session high.
Official data released earlier revealed that Japan's gross domestic product contracted by an annualized 1.6% in the third quarter following a 7.3% drop in the preceding quarter, which puts the country in a recession.
Economists were forecasting a 2.3% growth rate, and the unexpected contraction sparked concerns that the global economy may be battling headwinds.
Separately, Japanese Prime Minister Shinzo Abe was expected to postpone a planned sales tax increase due to come into effect next year after a sales tax hike in April of this year acted as a drag on growth.
The prime minister was also expected to call for snap elections which could take place as soon as next month.
The yen plunged on the news though it later recovered, as investors ditched Japanese stocks and later snapped up nicely-priced positions in the currency.
The yen often rises when Japanese stocks fall.
Elsewhere, news of Japan's recession offset mixed U.S. economic indicators.
The Federal Reserve reported earlier that industrial production contracted by 0.1% in October, disappointing expectations for a gain of 0.3%.
Industrial production for September was revised down to a gain of 0.8% from a previously reported increase of 1.0%.
The report showed that the capacity utilization rate, a measure of how fully firms are using their resources, dipped to 78.9% in October from 79.2% in September, missing expectations for a 79.3% reading.
In a separate report, the Federal Reserve Bank of New York said that its general business conditions index increased to 10.2 this month 6.2 in October. Analysts had expected the index to rise to 11.1 in November, though a reading above 0.0 indicates improving conditions, which gave the dollar support.
The new orders index rose eleven points to 9.1, and the shipments index advanced eleven points to 11.8.
The index for number of employees edged down to 8.5 but remained positive, indicating that employment levels grew, which also bolstered the greenback.
Indexes for the six-month outlook were generally higher this month and conveyed a strong degree of optimism about future business conditions.
The Empire State index is of interest to traders primarily because it is seen as an early forecast of the Institute for Supply Management's widely-watched factory survey.
Separately, the yen was up against the euro and down against the pound, with EUR/JPY down 0.41% at 145.07, and GBP/JPY trading up 0.01% at 182.26.
On Tuesday, the U.S. is to release data on producer price inflation.
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