The yen gained even more on Friday in a series of Japanese data through consumer prices, retail sales, the household spending and industrial production on Friday and all before a review of the central bank policy close harmony.
USD / JPY was trading at 104.19, down 1.03%, while the AUD / USD was trading at 0.7530, up 0.36%.
Later in the session, the Bank of Japan will announce its latest interest rate and monetary policy decision.
Earlier in Japan, household spending fell 1.1% in June month, compared with an expected gain of 0.4% a year on year down 2.2%. National CPI fell 0.4% in June year on year, with expectations, while the unemployment rate fell to 3.1% from 3.2%.
In Japan, industrial production increased by 1.9%, much better than the gain of 0.7% in June from month to month and retail sales fell 1.4%, slightly slower than expected decreased 1.5%.
Australia said the PPI data for the second quarter totaled a gain of 0.1%, below the 0.2% gain seen quarter to quarter.
The yen initially soared against the dollar in Thursday’s session, amid signs that the Bank of Japan could still meet market expectations by adopting measures only moderate easing in a highly anticipated meeting on Friday.
While Prime Minister Shinzo Abe unveiled a broad stimulus plan ¥ 28 billion on Wednesday, Reuters reported that the Japanese government can only provide as much as ¥ 7 billion direct fiscal stimulus. If Abe is unable to fulfill the promises of help start the economy with a broad stimulus initiative, the BoJ might feel added pressure to lower interest rates deeper into negative territory.
The US dollar index, which measures the strength of the greenback versus a basket of six major currencies, fell 0.21% to 96.49.
Overnight the dollar pared losses as investors received a full day to digest declaration of relatively neutral monetary policy of the Federal Reserve before the highly anticipated meeting of the Bank of Japan to close the week.
In more general terms, the dollar is still up 2.43% compared to its Japanese counterpart since July 12, when former Fed chairman, Ben Bernanke, reportedly outlined the ramifications of a policy monetary helicopter in the Japanese economy at a meeting in Tokyo with Abe.
Investors in global currency markets followed I reacting to the interest rate decision on Wednesday the central bank of the United States, after the Federal Open Market Committee (FOMC) left its benchmark federal funds rate unchanged in a level between 0.25 and 0.50% at the conclusion of its July policy meeting.
While noting that the risks near term to the economic outlook have declined in the last month, the FOMC said it still expects that economic conditions can not justify the gradual increases in interest rates in the short term in the coming months.
For the most part, markets interpreted the statement as a pessimistic indication that the FOMC might delay the time of its next rate hike beyond its next meeting in September. Upon release, the CME Group (NASDAQ: NASDAQ: CME) tool clock Fed reduced the likelihood that the Fed could raise interest rates in September to 18%, down from 20.3% at the beginning of the session.
Any rate increases by the FOMC this year are seen as bullish for the dollar as foreign investors accumulate in the greenback in order to take advantage of higher yields.