Several positive economic publications from Japan supported the Yen during last week’s trading. The Japanese Leading Indicators Index rose by 89.7% on October. This index is designed to predict the direction of the Japanese economy. It is a combination of 12 economic indicators related to employment, production, new orders and more. The extremely positive figure has shown that the Japanese economy is indeed recovering, and as a result boosted the Yen.

As for the week ahead, traders should look forward to the Tertiary Industry Activity report on Tuesday. This report measures the change in the total value of services purchased by businesses. If the end result will reach expectations for a 0.5% rise in October, this may support the Yen further.

Looking ahead, traders may want to pay attention to the news coming out of Europe and America. Any negative European news would increase the Yen’s appeal as a safe haven currency and could lead to serious gains. At the same time, positive news from Europe may lead to a prolonged drop in the Yen against its major counterparts.

The JPY also rose on speculation Japanese officials won’t act to weaken it even as they say they are concerned about the effect of yen strength on the economy. The Yen tends to strengthen during times of turmoil because Japan’s trade surplus makes it less reliant on foreign capital. The nation’s current-account surplus increased 42.7% to 1.4 trillion yen ($15.7 billion) in October from a year earlier, the Ministry of Finance said yesterday. The JPY traded at 130.01 per EUR, after appreciating yesterday as much as 2.4%, the biggest intraday gain since Nov. 27. Japan’s currency was at 88.43 per Dollar, following a 1.2% advance.

As the USD/JPY approached the key 90 yen level, the currency pair was sold off. Today’s overall Dollar weakness also helped to push the pair lower. The pair is now trading down at 89.03 from an opening price of 89.86.

Yesterday’s price movement can be attributed to the speech by Federal Reserve Chairman Ben Bernanke. The market may continue to be influenced by speculation and predictions of just when the U.S. will raise interest rates. With this in mind, the dollar may push above the 90 yen resistance level by the end of the week.

The Yen’s downtrend came as a result of the negative Japanese economic data which was published last week. The Preliminary Industrial Production report for October rose by 0.5%, failing to reach expectations for a 2.5% rise. In addition, the Japanese Capital Spending report, which measures the change in the total value of new capital expenditures made by businesses for this year’s third quarter, dropped by 24.8%. This has shown that the Japanese economy has yet to recover from the recession, and that recovery may take longer than expected. Also last week, the Bank of Japan (BoJ) decided to leave Interest Rates at 0.10%, the lowest rates in the industrial world. This has also contributed to the weak Yen.

As for this week, a batch of data is expected from the Japanese economy. Nevertheless, traders are advised to follow the Core Machinery Orders report scheduled for Wednesday. This is a leading indicator of production, and if the end result will be negative as well, the Yen could be further weakened.

The yen was under pressure for the second straight day after the Bank of Japan said this week it would further ease monetary policy in order to combat a surging yen and dropping prices. The dollar fell to a 14-year low of 84.80 on Friday. Japanese officials then had mentioned intervention as a possibility in order to weaken the yen. But this week’s action plans to offer about 10 trillion yen ($115.8 billion) in short-term loans to commercial banks to boost liquidity and maintaining the key interest rate at 0.10% could help weaken the yen without resorting to selling the currency.

The Yen also faced some troubling news in early morning trading on Thursday, as Bank of America reported that it will pay back the $45 billion it received in a U.S. tax payer bailout earlier this year. Investor confidence increased as a result, further damaging the safe haven Yen.

The Bank of Japan decided at an emergency meeting to make available 10 trillion yen for short-term loans to commercial banks. It also unanimously voted to keep its overnight call-rate target at 0.1%. But despite the Yen’s weakness on Tuesday, some analysts said the BOJ moves will not be enough to slow long-term yen buying against the dollar. Many traders expect more Yen strength against the U.S dollar so long as U.S. interest rates also remain essentially at zero too, and that the prospects of yen-weakening intervention by Japan remains low given the Dollar’s overall weakness.

The move to safety followed the news of a payment freeze on the $60 billion debt of Dubai World. The Yen traded at 86.44 per Dollar from 86.41. The Yen was at 129.77 per EUR from 129.64. The Yen seems to be able to hold on to the gains it makes during flights to safety by investors during days of poor financial sentiment.