OTTAWA (dpa-AFX) - The Japanese yen strengthened against other major currencies in the Asian session on Wednesday, as investors remain cautious of persisting trade uncertainty and escalating geopolitical tensions, which provide some support to the safe-haven JPY.
Concerns about the escalating tensions in the Middle East that fueled fresh speculation that the U.S. is on the verge of joining Israel's attack on Iran weighed on the sentiment. Traders are also cautious ahead of the U.S. Fed's interest-rate decision.
While reports hinting at an end to hostilities contributed to a rally on Monday, news that U.S. President Donald Trump left a G7 summit early to focus on the conflict has led to worries about further escalation after Trump demanded an 'unconditional surrender' from Iran.
Amid concerns over economic growth, the Bank of Japan (BoJ) indicated that it would be careful in winding down its ten-year monetary stimulus. As a result, investors have to postpone their expectations for the next BoJ rate hike until Q1 2026.
As was largely anticipated, the Bank of Japan said it will moderate the pace of reductions in its government bond purchases starting in April of next year and kept the benchmark rate at 0.5% on Tuesday in the face of growing growth threats.
In economic news, Japan posted a merchandise trade deficit of 637.6 billion yen in May, the Ministry of Economy, Trade and Industry said on Wednesday. That exceeded expectations for a shortfall of 893.0 billion yen following the upwardly revised 115.6-billion-yen deficit in April (originally 115.8 billion yen).
Exports were down 1.7 percent on year, topping forecasts for a decline of 3.8 percent following the 2.0 percent increase in the previous month. Imports were down an annual 7.7 percent versus expectations for a decline of 6.7 percent after shrinking 2.2 percent a month earlier.
Meanwhile, the value of core machinery orders in Japan was down a seasonally adjusted 9.1 percent on month in April, the Cabinet Office said on Wednesday - coming in at 919-0 billion yen. That beat forecasts for a decline of 9.3 percent following the 13.0 percent jump in March. On a yearly basis, core machinery orders rallied 6.6 percent - again topping forecasts for a gain of 4.0 percent after gaining 8.4 percent in the previous month. The total value of machinery orders received by 280 manufacturers operating in Japan fell 2.3 percent on month and added 0.6 percent on year in April.
In the Asian trading today, the yen rose to a 5-day high of 194.78 against the pound, from yesterday's closing value of 195.24. On the upside, 192.00 is seen as the next resistance level for the yen.
Against the Swiss franc and the Canadian dollar, the yen advanced to 2-day highs of 177.50 and 106.06 from Tuesday's closing quotes of 177.97 and 106.24, respectively. If the yen extends its uptrend, it is likely to find resistance around 174.00 against the franc and 104.00 against the loonie.
The yen edged up to 166.71 against the euro, from yesterday's closing value of 166.93. The next possible upside target for the yen is seen around the 163.00 region.
Moving from an early 1-week low of 145.44 against the U.S. dollar, the yen edged up to 144.90. The yen may test resistance around the 143.00 region.
Looking ahead, Eurozone current account data for April, U.K. house price data for April and Eurozone final inflation figures for May are slated for release in the European session.
In the New York session, U.S. MBA mortgage approvals data, U.S. building permits and housing starts for May, U.S. weekly jobless claims data and U.S. EIA crude oil data are set to be published.
At 2:00 pm ET, the U.S. Federal Reserve (Fed) will announce its monetary policy decision. The central bank expects the interest rate to remain unchanged at 4.5 percent.
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