The yen is maintaining a firm tone and there will also be further speculation over capital repatriation to Japan which will support the yen. There is likely to be further institutional dollar support at current levels which will offer significant dollar protection and verbal intervention remain a significant risk. Overall, the yen should maintain a firm tone in the near term, but looks to offer little value without a corrective retreat to at least 92.20 against the dollar given the probability of strong support close to 90.0.
The US currency dipped to lows near 91.40 in New York on Thursday as underlying dollar sentiment remained weak with the yen also broadly resilient on the main crosses.
The Japanese data was weaker than expected with second-quarter GDP revised to a reading of 0.6% following a 0.9% preliminary increase, primarily due to lower inventories which will maintain some degree of caution over the outlook. The Chinese data was generally robust which maintained confidence in regional equity markets
There was further speculation over capital repatriation back to Japan and the yen was still proving to be broadly resilient despite a sustained improvement in international risk appetite. Dollar loses are likely to be curbed by option-related support and institutional buying on any retreat towards important technical levels near 90 against the Japanese currency.