Forex - USD/JPY shoots up on bullish U.S. retail sales report

The dollar shot up against the yen on Thursday after U.S. retail sales figures beat expectations and sent investors taking up positions on the possibility that the Federal Reserve could announce plans to scale back its USD85 billion monthly asset-purchasing program as early as next week.

In U.S. trading on Thursday, USD/JPY was trading at 103.26, up 0.82%, up from a session low of 102.39 and off a high of 103.32.

The pair was likely to find support at 102.18, Wednesday's low, and resistance at 103.39, Tuesday's high.

The Commerce Department reported earlier that U.S. retail sales rose 0.7% in November, beating market expectations for a 0.6% increase. Core retail sales, which are stripped of automobiles, rose 0.4%, well above forecasts for a 0.2% increase.

The data kept expectations alive that the Federal Reserve will soon decide to taper its USD85 billion in monthly bond purchases, possibly at Dec. 17-18 policy meeting if not in early 2014.

Monthly bond purchases aim to drive recovery by depressing long-term interest rates, weakening the dollar as a side effect, though talk of their dismantling can bolster the U.S. currency.

Elsewhere, the U.S. Department of Labor said the number of individuals filing for initial jobless claims assistance last week rose to a two-month high of 368,000, far surpassing expectations for an increase to 320,000 from the previous week's revised total of 300,000.

Markets shrugged off the news, attributing the increase to holiday volatility typical this time of year, while a budget deal underway in the U.S. Congress also sent the dollar rising amid sentiments that fiscal uncertainties may fade and further convince the Fed the economy is in less need of monetary support.

The yen was down against the pound and down against the euro, with GBP/JPY up 0.60% and trading at 168.76 and EUR/JPY trading up 0.50% at 141.93.

On Friday, the U.S. is to round up the week with data on producer price inflation.