USD/JPY: Yen Edges Lower As Markets Eye Key US Releases

 | Dec 04, 2013 08:30AM ET

The Japanese yen has reversed directions on Wednesday and has posted modest losses against the US dollar. The USD/JPY is trading in the mid-102 range in the European session. After a slow start to the week, there’s plenty of action out of the US on Wednesday, with four key events – ADP Non-Farm Employment Change, Trade Balance, ISM Non-Manufacturing PMI and Home Sales. There are no Japanese releases on Wednesday.

Earlier in the week, the Bank of Japan Governor Haruhiko Kuroda said on Monday that he remained committed to the BOJ's inflation target of 2% within two years. Although deflation has dramatically decreased, inflation indicators point to much lower inflation than the 2% level. Kuroda also said that the Bank's ultra-loose monetary policy would continue until the inflation target was met. However, some policymakers don't share Kuroda's optimism that this ambitious goal will be achieved and the lack of consensus at the BOJ, as we saw in the minutes from the Bank's last policy meeting, could weigh on the yen.

In the US, the markets will be keeping a close eye on this week’s employment releases, stating with the ADP Non-Farm Payrolls later on Wednesday. If US employment numbers continue to improve, the Federal Reserve is likely to take action and taper QE early next year. Unemployment Claims have looked sharp for the past two releases, and if the Non-Farm Payrolls and Unemployment Rate look solid this week, the US dollar could gain ground against the struggling Japanese yen.