Elevated Oil prices and wide rate differentials weigh on Japanese Yen

Robust US jobs figures underpin the US Dollar, lifting USD/JPY as the Japanese Yen lags its peers.
The Yen remains under pressure from high energy prices and Japan’s comparatively low interest rates.
US midterm elections, developments involving the US and Iran, and forthcoming employment figures remain on traders’ radar.

Stronger-than-forecast US economic figures support the US Dollar (USD) on Tuesday, helping USD/JPY move modestly higher as the Japanese Yen (JPY) trails its major counterparts. With oil prices remaining volatile, traders are also following the US midterm elections and news involving the US and Iran. The pair stands at around 158.50 at the time of writing, a daily gain of 0.37%.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

September’s US JOLTS Job Openings climbed from 7.19 million to 7.523 million, surpassing the forecast of 7.13 million. Having rebounded from an intraday trough of 101.63, the US Dollar Index (DXY), which measures the currency against six major counterparts, stands near 101.90.

Shifting headlines drive swings in oil prices on Tuesday. An initial rise followed a Wall Street Journal (WSJ) report of a US strike on Iran’s Qeshm Island. Crude subsequently retreated on unconfirmed reports of concessions by Washington and Tehran concerning Iran’s nuclear programme and frozen funds, then recouped part of the decline.

Despite continued diplomatic efforts, the absence of a clear way forward in US-Iran talks keeps oil prices elevated. Inflation risks stemming from energy costs bolster expectations that the Federal Reserve (Fed) will raise interest rates further. Following a 25 basis points (bps) increase in September, the Fed left rates unchanged in October and reiterated its commitment to restoring price stability. According to the CME FedWatch Tool, traders assign a 75% probability to a further rise in December.

Expectations of additional tightening by the Bank of Japan (BoJ) have not relieved pressure on the Japanese Yen. Other major central banks also retain a hawkish stance because of the energy shock. As a result, Japan’s interest rates remain relatively low compared with those of its peers, leaving the Yen at a yield disadvantage.

Reliance on energy imports, especially Middle Eastern crude, makes Japan particularly exposed. High oil prices increase its import costs and could act as a drag on economic growth.

With few Japanese economic releases scheduled for the remainder of the week, attention turns to US labour market figures. Wednesday brings ADP Employment Change, with Initial Jobless Claims due on Thursday and Nonfarm Payrolls (NFP) on Friday.

Japanese Yen Performs Best Against Swiss Franc Today

Today’s percentage movements in the Japanese Yen (JPY) against the major currencies listed are set out below. The Yen recorded its strongest performance against the Swiss Franc.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.00%	-0.02%	0.33%	0.00%	0.27%	0.02%	0.36%
EUR	-0.01%		-0.03%	0.34%	-0.01%	0.26%	0.00%	0.34%
GBP	0.02%	0.03%		0.34%	0.02%	0.30%	0.03%	0.38%
JPY	-0.33%	-0.34%	-0.34%		-0.33%	-0.06%	-0.31%	0.03%
CAD	-0.01%	0.01%	-0.02%	0.33%		0.28%	0.02%	0.35%
AUD	-0.27%	-0.26%	-0.30%	0.06%	-0.28%		-0.25%	0.08%
NZD	-0.02%	-0.00%	-0.03%	0.31%	-0.02%	0.25%		0.34%
CHF	-0.36%	-0.34%	-0.38%	-0.03%	-0.35%	-0.08%	-0.34%

Percentage movements between the major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. For instance, choosing the Japanese Yen on the left and following its row across to the US Dollar gives the percentage change for JPY (base)/USD (quote) in the corresponding cell.