Currencies: Yen Rises on Good News on its Homefront

The dollar is losing value to the yen on -- get this -- positive data out of Japan today.

Japan today reported stronger than expected figures for industrial production in December, calculating a rise of 1.5% compared to expectations of 1%. After months of negative data coming out of Japan -- as its economy slipped further and further -- this morning's report could prove truly beneficial. The yen is rallying against both the dollar and the euro.

With little news out of euroland today, the currency markets are eagerly awaiting the U.S. Federal Open Market Committee meeting that begins tomorrow and on Wednesday will announce what kind of rate cut the Federal Reserve has in mind. The Fed is expected to cut Fed Funds interest rates by 50 basis points.

Ahead of this decision, traders are reluctant to sell dollars in expectation of a boost in value if and when the rate cut is announced, according to Reuters. This is keeping the dollar/yen trading in a narrower range than might have been expected on the Japanese data alone.

The dollar was recently trading for 116.57 yen, down from a close last Friday of 117.32 yen.

The news is also helping the yen rebound against the euro. The euro was recently trading for 107.13 yen, down from its last close of 108.34 yen.

As a result of worse euro losses than dollar losses against the yen today, the euro is also falling in value against the dollar. The euro was trading recently at $0.9187, down from its close of $0.9238 on Friday.

The fall below the $0.9190 mark has signaled a drop below a key support level, leading analysts to believe traders will test the $0.9120 and $0.9080 levels, according to Global FX: News and Views, a publication of Mellon Bank.

In other major currency trading, the dollar is up against the British pound and the Australian dollar. With the Fed meeting lurking just over the horizon, the dollar continues to gain strength around the globe on expectations of a rate cut. The pound was recently trading at $1.4570, down from $1.4609 at the close. The Australian buck was down on the U.S. currency, recently at $0.5426, down from Friday's close of $0.5440.

The Canadian dollar was up just slightly on the U.S. currency this morning, however, with the U.S. dollar trading for C$1.5039, down marginally from C$1.5043.

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