- USD/JPY extends losing streak for fourth trading session and trades below 150.00 ahead of US NFP.
- The US NFP report is expected to show a slowdown in labor demand, a decline in wage growth and a stable unemployment rate.
- The BoJ’s hawkish monetary policy has led to a strengthening of the Japanese Yen.
The USD/JPY pair is trading within Thursday’s trading range below the psychological 150.00 figure in the late Asian session on Friday. The asset remains on the defensive as the Federal Reserve’s (Fed) expected dovish interest rate guidance has dampened the US Dollar’s ​​appeal. Moreover, the Japanese Yen’s strong showing on the back of the more aggressive-than-expected Bank of Japan policy tightening has weighed on the pair.
Market sentiment remains risk-off ahead of the release of the US (US) Non-Farm Payrolls (NFP) data for July, due at 12:30 GMT. S&P 500 futures have posted significant losses in Asian trading hours.
Economists have estimated that 175,000 new workers were hired in July, down from the previous addition of 206,000. The unemployment rate is expected to remain stable at 4.1%.
Investors will be focused on average hourly earnings data, a key measure of wage growth that drives consumer spending and eventually influences price pressures. On an annual basis, the wage growth measure is estimated to have slowed to 3.9% from the previous reading of 3.7%, with the monthly figure growing steadily by 0.3%.
Meanwhile, the Dollar Index (DXY), which tracks the value of the greenback against six major currencies, fell to 104.23.
The Japanese Yen, however, is performing well since the BoJ raised interest rates by 25 basis points (bps) versus estimates of 10 bps. In addition, the BoJ pledged to halve bond-buying operations by early 2026. BoJ Governor Kazuo Ueda kept the door open for more rate hikes this year and sounded confident of a further increase in price pressures and an improvement in economic conditions.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the most traded currencies in the world. Its value is determined broadly by the performance of the Japanese economy, but more specifically by the policy of the Bank of Japan, the spread between Japanese and US bond yields, and risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key to the Yen. The BoJ has intervened directly in currency markets on occasion, usually to lower the value of the Yen, although it often refrains from doing so due to political concerns of its major trading partners. The BoJ’s current ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its major currency peers. This process has been exacerbated more recently by a growing policy divergence between the BoJ and other major central banks, which have opted to sharply raise interest rates to combat decades-old levels of inflation.
The Bank of Japan’s stance of maintaining an ultra-loose monetary policy has led to an increase in policy divergence with other central banks, in particular with the US Federal Reserve. This favours the widening of the spread between US and Japanese 10-year bonds, which favours the Dollar against the Yen.
The Japanese Yen is often considered a safe haven investment. This means that in times of market stress, investors are more likely to put their money into the Japanese currency due to its perceived reliability and stability. In turbulent times, the Yen is likely to appreciate against other currencies that are considered riskier to invest in.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
