Yen strengthened further against the dollar after disappointing U.S. housing data today. Pending homes sales declined in April, dropping 5.5 percent from March. Expectations were for no change in the monthly reading. The year-over-year forecast was for a larger increase of 22.0 percent but only increased by 14.7 percent.
The Pending home sales report comes after yesterday’s S&P/Case-Shiller index which showed that housing prices dropped to their lowest post-crisis 2008 levels. Both reports suggest that the U.S. housing sector remains weak and the U.S. economy is starting to show signs of stress. Some analysts believe that the housing market has not bottomed yet.
If housing sales are continuing to fall even as mortgage rates remain at record lows, it suggest that that American home buyers are waiting for prices to drop lower. Therefore, until prices do drop further, the housing market won’t have a sustained rate of demand to suggest a bottom is in place.
USDJPY extended its decline after the data at 10am New York time, falling to 78.85, the lowest level since February.