Forex - USD/JPY drops on jobs data, Chinese tightening concerns

Investing.com - The dollar sank against the yen on Wednesday amid growing expectations for the Federal Reserve to continue stimulating the U.S. economy, while the yen gained on expectations for China's central bank to begin tightening policy in the near future.

In U.S. trading on Wednesday, USD/JPY was trading at 97.34, down 0.82%, up from a session low of 97.16 and off a high of 98.20.

The pair was likely to find support at 96.57, the low from Oct. 7, and resistance at 98.48, Tuesday's high.

The dollar continued to come under selling pressure after the Department of Labor revealed on Tuesday that U.S. economy added 148,000 jobs in September, well below expectations for an increase of 180,000.

The previous month's figure was revised up to a gain of 193,000 from a previously reported increase of 169,000.

July's figure was revised down to 89,000 from 104,000.

The unemployment rate ticked down to a four-and-a-half year low of 7.2% from 7.3% in August due in part to more people dropping out of the labor force.

The data kept expectations going strong that the Federal Reserve will continue stimulating the economy to boost job creation by buying assets each month, possibly well into 2014.

The Fed is currently purchasing USD85 billion in Treasury holdings and mortgage debt a month to boost the economy, a monetary policy tool known as quantitative easing that drives down interest rates to spur recovery and job creation, weakening the dollar in the process.

Separately, concerns that China's central bank may tighten monetary policy to help control inflation in the world's second-largest economy sent investors chasing safe-haven currency positions.

The yen saw particularly robust demand on rising Chinese money-market rates, a sign the financial sector may be anticipating China's central bank to tighten policy.

The yen was up against the pound and up against the euro, with GBP/JPY down 1.21% and trading at 157.40 and EUR/JPY trading down 0.79% at 134.15.

On Thursday, the U.S. is to release the weekly report on initial jobless claims as well as data on new home sales.

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