Yen Climbs Against Majors

The Japanese yen strengthened against its key counterparts on Wednesday, as the Bank of Japan's decision to lower bond purchases in its latest operations stocked speculation that the bank is shifting towards tightening policy.

Japanese government bond yields extended rally after the Bank of Japan surprised markets on Tuesday by reducing its purchases of long-dated Japanese bonds.

The central bank cut the amount of buying in Japanese government bonds by 10 billion each for 10-25 year and 25-40 year bonds.

The BoJ purchased 190 billion yen of 10-25 year JGBs, down from previous purchases of 200 billion yen and 80 billion yen of 25-40 year JGBs, compared to 90 billion yen purchased at its previous operation.

Sentiment was subdued after Chinese inflation data painted a mixed picture of the economy.

Consumer prices in China rose an annual 1.8 percent in December, the National Bureau of Statistics said. That missed expectations for an increase of 1.9 percent but was up from 1.7 percent in November.

The bureau also said that producer prices jumped an annual 4.9 percent, exceeding forecasts for a gain of 4.8 percent but down from 5.8 percent in the previous month.

The currency has been trading in a positive territory in the Asian session.

The yen climbed to a 1-1/2-month high of 111.66 against the greenback and a new 3-week high of 133.34 versus the euro, from its early lows of 112.78 and 134.56, respectively. If the yen rises further, it may locate resistance around 111.00 against the greenback and 132.00 against the euro.

The yen reversed from its early lows of 114.64 against the franc and 152.60 against the pound, rising to more than 3-week highs of 113.67 and 150.68, respectively. The next possible resistance for the yen is seen around 113.00 against the franc and 150.00 against the pound.

The yen strengthened to a 2-week high of 87.48 against the aussie, weekly high of 89.84 against the loonie and a 6-day high of 80.24 against the kiwi, off its previous lows of 88.17, 90.43 and 80.69, respectively. The yen is seen finding resistance around 86.00 against the aussie, 88.00 against the loonie and 79.00 against the kiwi.

Looking ahead, U.S. import and export prices for December and wholesale inventories for November as well as Canada building permits for the same month are set for release in the New York session.