USD/JPY Daily Fundamental Analysis for April 29, 2011

The USD/JPY pair headed to the downside after the Fed kept rates steady between zero and 0.25%. The dollar lost ground against the Japanese currency, as the Fed policy makers are not considering a tighter monetary policy, opening the door for some gains for JPY.

On the contrary, the yen weakened versus other majors affected by S&P downgrade on Japan’s sovereign-rating outlook to “negative”, in addition to the heavy drop in Japan’s industrial production during March, which dropped by 15.3% compared with the pervious expansion 1.8%.

On the other hand, the Bank of Japan kept interest rate unchanged at virtually zero, in the bank’s efforts to support the Japanese economy from the March 11 quake aftermath.

Japanese policy makers kept the asset-purchases unchanged at 10 trillion yen, in addition to the credit-loan program which was kept steady at 30 trillion yen, while the BOJ accepts BBB-rated corporate bonds as collateral.

The market sentiment didn’t change after the BOJ decision, as Japan’s central bank didn’t change any of its stimulus programs, while market participants are anticipating the Japanese government to announce the rebuilding plans after the earthquake.

On Friday, the US is to release the Income Report for March at 12:30 GMT. Expectations indicate income to rise to 0.4% from 0.3% while spending will decline to 0.5% from 0.7%. Core PCE is expected with a drop on the month to 0.1% from 0.2% and steady on the year at 0.9%.

Furthermore, the world’s largest economy is to release the Chicago PMI for April at 13:45 GMT and expected to slow to 68.2 from 70.6. The US University of Michigan confidence final reading for the month of April is due at 13:55 GMT and expected with an upside revision to 70.0 from 69.6.

Written by ForexMansion.com