USD/JPY slides as US shutdown fears boost Yen’s safe-haven appeal

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The Japanese Yen (JPY) gains traction against the US Dollar (USD) on Tuesday, with USD/JPY extending losses for a third straight day as the looming United States (US) government shutdown weighs on the Greenback and bolsters safe-haven demand for the Yen.

The Japanese Yen gains as USD/JPY falls for a third straight session amid safe-haven demand.
The Greenback stays on the defensive as investors brace for a potential US government shutdown.
Focus turns to Wednesday’s Japanese Tankan survey and US ADP Employment and manufacturing PMI releases.

Investors largely shrugged off Japan’s weak economic activity data released earlier in the day, instead turning their attention to the political gridlock in Washington. US President Donald Trump, speaking at the White House on Tuesday, warned that “we’ll probably have a shutdown” and said his party “can cut benefits” as part of spending negotiations, adding that “Democrats are taking a risk” by resisting his proposals.

Chicago Fed President Austan Goolsbee said on Tuesday that short government shutdowns have little impact on the economy, but cautioned that the overall effect depends on the breadth and duration of the shutdown.

The remarks came as a Tuesday midnight deadline looms, leaving the government on track for a potential shutdown from Wednesday unless lawmakers strike a last-minute deal.

Beyond the shutdown debate, Goolsbee said the US labor market remains “pretty steady,” noting that while payroll growth is slowing, other job indicators have stayed broadly stable. He also warned that the country “seems to be headed into a new wave of tariffs,” adding that he hopes these measures prove to be a one-time, moderate price increase. Goolsbee cautioned that if inflation proves more persistent, it would pose a difficult scenario for the Federal Reserve.

Across the Pacific, US macro releases offered limited support to the Dollar. The Conference Board’s Consumer Confidence Index dropped to 94.2 in September from a revised 97.8 in August, while JOLTS Job Openings for August edged up to 7.23 million from 7.21 million in July, broadly in line with expectations.

Looking ahead, focus shifts to upcoming economic data from both sides of the Pacific. In Japan, the third-quarter Tankan survey is due on Wednesday, while in the United States, attention turns to the ADP Employment Change report along with S&P Global’s and ISM Manufacturing Purchasing Managers’ Index (PMI) readings, also scheduled for Wednesday.

Economic Indicator

ADP Employment Change

The ADP Employment Change is a gauge of employment in the private sector released by the largest payroll processor in the US, Automatic Data Processing Inc. It measures the change in the number of people privately employed in the US. Generally speaking, a rise in the indicator has positive implications for consumer spending and is stimulative of economic growth. So a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

Traders often consider employment figures from ADP, America’s largest payrolls provider, report as the harbinger of the Bureau of Labor Statistics release on Nonfarm Payrolls (usually published two days later), because of the correlation between the two. The overlaying of both series is quite high, but on individual months, the discrepancy can be substantial. Another reason FX traders follow this report is the same as with the NFP – a persistent vigorous growth in employment figures increases inflationary pressures, and with it, the likelihood that the Fed will raise interest rates. Actual figures beating consensus tend to be USD bullish.