• USD/JPY holds near multi-month highs as intervention risks temper follow-through buying.
• Upbeat US data reinforce the view that the Fed can remain patient on easing.
• Political uncertainty in Japan weighs on the Yen as snap election risks keep sentiment cautious.

The Japanese Yen (JPY) treads water against the US Dollar (USD) on Thursday, as USD/JPY lacks strong follow-through buying amid lingering intervention risks tied to excessive Yen weakness.

At the time of writing, the pair trades around 158.50, little changed on the day, remaining near its highest level since July 2024.

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.41, its highest level since December 3, as stronger-than-expected US economic data reinforced the view that the Federal Reserve (Fed) can remain patient on further policy easing, even as markets continue to price in two rate cuts this year.

Data released by the US Department of Labor showed that Weekly Initial Jobless Claims fell to 198,000 in the week ended January 10, undershooting market expectations of 215,000. The previous week’s figure was revised lower to 207,000 from 208,000.

Meanwhile, the four-week moving average of Initial Claims fell to 205,000 from a downwardly revised 211,500.

Regional manufacturing data also improved, with the Empire State index rising into positive territory at 7.7 from -3.7, while the Philadelphia Fed survey climbed to 12.6 from -8.8.

Further support came from cautious remarks by Fed officials. Chicago Fed President Austan Goolsbee said he still expects the Fed to cut interest rates this year but stressed that incoming data are needed to affirm that outlook, adding that rates "can still go down a fair amount" only if there is firm evidence inflation is retreating.

Separately, Atlanta Fed President Raphael Bostic said the Fed needs to keep policy restrictive because inflation remains too high, adding that price pressures could persist through 2026 even as he expects growth to stay above 2%.

In Japan, political uncertainty continues to weigh on sentiment after reports that Prime Minister Sanae Takaichi plans to dissolve parliament next week and call a snap parliamentary election.

At the same time, markets remain wary that sustained Yen weakness could complicate the Bank of Japan’s (BoJ) monetary policy path as the central bank proceeds cautiously with policy normalization.