USD/JPY weakens below 157.50 as intervention fears offset strong US jobs growth

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The USD/JPY pair trades in negative territory near 157.40 during the early Asian session on Friday. The Japanese Yen (JPY) strengthens against the US Dollar (USD) amid intervention fears.

USD/JPY softens to around 157.40 in Friday’s early Asian session.
US Nonfarm Payrolls rose by 119,000 in September, stronger than expected.
Verbal intervention from Japanese authorities might help limit the JPY’s losses.

The USD/JPY pair trades in negative territory near 157.40 during the early Asian session on Friday. The Japanese Yen (JPY) strengthens against the US Dollar (USD) amid intervention fears. The preliminary reading of the US S&P Global Purchasing Managers Index (PMI) will be in the spotlight later on Friday.

Data released by the US Bureau of Labor Statistics (BLS) on Thursday showed that Nonfarm Payrolls (NFP) in the United States (US) rose by 119,000 in September, compared to the 4,000 decrease (revised from +22,000) recorded in August. This figure surpassed the market expectation of 50,000.

Meanwhile, the Unemployment Rate ticked up to 4.4% in September from 4.3% in August. The Average Hourly Earnings held steady at 3.8% YoY, compared to the market expectation of 3.7%.

This report showed signs of faster US job growth in September, suggesting the US Federal Reserve (Fed) is likely to pause cutting interest rates in December. This, in turn, could provide some support to the Greenback against the JPY. Fed funds futures are now pricing in nearly a 39% chance of a 25 basis points (bps) reduction at the Fed's December meeting, according to the CME Group's FedWatch tool.

On the other hand, some verbal intervention from Japanese authorities could underpin the JPY and create a headwind for the pair. Japan's Chief Cabinet Secretary Minoru Kihara said on Thursday that the recent FX moves are sharp and one-sided and that he is watching the FX market move with a high sense of urgency. Kihara further stated that the FX market needs to move stably, reflecting fundamentals.

Data released by the Japan Statistics Bureau on Friday showed that the National Consumer Price Index (CPI) rose by 3.0% YoY in October, compared to the previous reading of 2.9%. Additionally, the National CPI ex Fresh food came in at 3.0% YoY in October versus 2.9% prior. The figure came in line with the market consensus. Finally, CPI ex Fresh Food, Energy rose 3.1% YoY in October, compared to the previous reading of 3.0%.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

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