Forex - USD/JPY gains on surging Japanese business confidence gauge

The dollar traded higher against the yen on Monday after a widely-watched Japanese index of business confidence beat expectations and enticed investors out of the safety of the yen and into equities.

In U.S. trading on Monday, USD/JPY was trading at 99.60, up 0.43%, up from a session low of 99.19 and off a high of 99.86.

The pair was likely to find resistance at 99.86, the earlier high, and support at 99.19, the earlier low.

Japan's Tankan index of sentiment among large manufacturers jumped up to 4 during the second quarter from -8 in the first quarter, outpacing market calls for a reading of 3.

The news sent Japanese stocks gaining earlier that came at the expense of the yen.

Meanwhile in the U.S. the Institute for Supply Management said its manufacturing purchasing managers’ index rose to 50.9 from 49.0 in May, above expectations for a reading of 50.5.

However, the report added that the employment index declined to 48.7 from 50.1 in May, falling below the 50 level that separates contraction from growth for the first time since September 2009.

The numbers dampened the dollar's advance ahead of the release of Friday’s U.S. nonfarm payrolls data, which could provide the market with a weather vane as to when the Federal Reserve begins to taper its USD85 billion-a-month asset purchasing program, which weakens the greenback to spur recovery.

The yen, meanwhile, was down against the pound and down against the euro, with GBP/JPY up 0.55% and trading at 151.63 and EUR/JPYtrading up 0.88% at 130.15.

On Tuesday, the U.S. is to release official data on factory orders, a leading indicator of production.