USD/JPY attracts some sellers to near 155.50 on weak US jobs data

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The USD/JPY pair attracts some sellers to around 155.60 during the early Asian session on Friday. The US Dollar (USD) edges lower against the Japanese Yen (JPY) amid worse-than-anticipated US employment data and a less hawkish outlook than expected from the US Federal Reserve (Fed).

USD/JPY edges lower to near 155.60 in Friday’s early Asian session.
US Initial Jobless Claims jumped to 236K last week, weaker than expected.
Concerns about expansionary fiscal measures in Japan and growth worries might cap the downside for the pair.

The Fed lowered the benchmark federal funds rate by 25 basis points (bps) to a range of 3.5%-3.75% at its December policy meeting on Wednesday. Fed Chair Jerome Powell highlighted that the US central bank is now "well positioned to wait and see how the economy evolves" and noted that a future rate hike is not a base case scenario. Fed officials signaled they expect to lower rates just once next year.

Data released by the US Department of Labor (DOL) on Thursday showed that the number of Americans filing for new unemployment benefits increased to 236,000 in the week ending December 6. The figure came in above the market consensus of 220,000 and was higher than the previous week of 192,000 (revised from 191,000). The Greenback faces some selling pressure against the JPY in an immediate reaction to the weaker-than-expected US jobs data.

Investors remain concerned about Japan's deteriorating fiscal condition amid Prime Minister Sanae Takaichi's reflationary push and massive spending plan to boost sluggish economic growth. This, in turn, could weigh on the JPY and create a tailwind for the pair.

The attention will shift to the Bank of Japan (BoJ) interest rate decision next week. All economists by Bloomberg and a strong majority in a Reuters poll expected the Japanese central bank to raise its current benchmark policy rate from 0.50% to 0.75% at this upcoming meeting.

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.