Investing.com - The U.S. dollar rallied against the yen during Wednesday's Asian session, as the USD/JPY traded up 0.44% to 87.43. The pair had been trending lower to start the week, but reversed course Wednesday.
The pair traded as high 87.55 and as low as 86.84 during the session.
For the USD/JPY, support is likely to be found 86.86, yesterday's low, while resistance can be found at 88.35, last Friday's high.
In recent weeks, the yen has been steadily gaining against the U.S. dollar, a trend which may have been called into question by the price action seen Monday and Tuesday. However, Wednesday's upward momentum suggests that yen could continue to weaken.
On a longer term basis, the yen has been weakening since early December when traders began to price in the monetary policy prescriptions of newly elected Japanese Prime Minister Shinzo Abe.
In the runup to the election, Abe promised to do everything he could to weaken the yen, and explicitly encourage the Bank of Japan to alter its policy on inflation targets. Although the Bank of Japan remains an independent body on a technical basis, many observers anticipated that the central bank would cave to Abe's demands.
Japan has been struggling to recover economically for nearly two decades. The nation's economy remains dependent on exports of high tech electronics and automobiles, industries which have been hurt by a strong yen.
In recent years, the Bank of Japan has undertaken a number of actions in an attempt to drive down the value of the yen, but the Bank has failed to weaken the yen over the longer term. With Abe in power, investors appear to believe that his administration can credibly weaken the yen.
Also adding to the move was broader dollar strength. The U.S. dollar also gained against the euro, pound and Canadian dollar on Wednesday, suggesting that investors were looking for a safe haven amid global uncertainity
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