Japanese Yen strengthens as US Dollar trims post-NFP gains

Broad US Dollar weakness lifts the Japanese Yen, leaving USD/JPY lower at the start of the week.
The 10-year Treasury yield approaches a two-month low as cheaper oil tempers US inflation worries.
With the BoJ indicating room for further tightening, traders await US inflation figures to assess prospects for a December Fed rate rise.

USD/JPY trades around 157.91 at the time of writing. The pair is down 0.36% on the day, opening the week lower as widespread US Dollar (USD) weakness supports the Japanese Yen (JPY).

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After US President Donald Trump played down the prospect of fresh strikes on Iran, oil extended its losses, putting pressure on the Greenback. West Texas Intermediate (WTI) is trading near $86 a barrel, a decline of more than 3% on the day.

At 4.83%, the benchmark 10-year US Treasury yield is down 0.33% on the day and close to a two-month low. Lower crude prices have eased some inflation worries, helping to contain US Treasury yields.

Having reached 102.36 after Friday’s stronger-than-expected US jobs release, the US Dollar Index (DXY) now trades around 101.80. The index measures the Greenback against a basket of six major currencies.

October’s US Nonfarm Payrolls (NFP) increased by 165K, more than twice the 65K forecast. The Unemployment Rate slipped from 4.2% to 4.1%. These readings bolster expectations for another Federal Reserve (Fed) rate increase. Traders assign roughly an 80% probability to a quarter-point rise in December.

Commenting on the Dollar’s partial reversal of its post-payrolls gains, Brown Brothers Harriman’s Elias Haddad says, “USD pared back some of Friday’s strong October non-farm payrolls gains.” On the outlook, he adds that “robust US economic activity, favorable labor market conditions and sticky underlying inflation back the Fed’s hawkish bias, keeping rate differentials supportive of USD,” underscoring the importance of forthcoming US releases in shaping expectations for the Fed’s policy trajectory.

Tuesday brings the US Consumer Price Index (CPI), with the Producer Price Index (PPI) scheduled for later in the week. Should CPI exceed expectations, rate-rise bets could strengthen, providing some support for the Dollar.

Further gradual tightening remains the Bank of Japan’s (BoJ) policy direction. Although it left its policy rate unchanged at 1.25% in October, the central bank indicated readiness for additional increases. A rise to 1.50% was favoured by board member Hajime Takata. Governor Kazuo Ueda, meanwhile, cautioned that inflation could exceed the BoJ’s 2% target.

According to Reuters, Japan’s Finance Ministry said on Monday that authorities bought ¥7.98 trillion of Yen on 30 July, the largest intervention on a single day. That scale helps account for traders’ continued caution over further intervention as USD/JPY rises.

Today's US Dollar Performance

Today’s percentage moves in the US Dollar (USD) against the major currencies listed appear in the table below. The Dollar’s strongest performance was against the Swiss Franc.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.46%	-0.45%	-0.25%	-0.12%	-0.57%	-1.22%	0.15%
EUR	0.46%		0.00%	0.21%	0.34%	-0.12%	-0.76%	0.60%
GBP	0.45%	-0.01%		0.21%	0.33%	-0.13%	-0.77%	0.60%
JPY	0.25%	-0.21%	-0.21%		0.13%	-0.32%	-0.97%	0.39%
CAD	0.12%	-0.34%	-0.33%	-0.13%		-0.45%	-1.10%	0.26%
AUD	0.57%	0.12%	0.13%	0.32%	0.45%		-0.64%	0.72%
NZD	1.22%	0.76%	0.77%	0.97%	1.10%	0.64%		1.37%
CHF	-0.15%	-0.60%	-0.60%	-0.39%	-0.26%	-0.72%	-1.37%

Percentage movements between 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. To read USD (base)/JPY (quote), for example, start with the US Dollar on the left and follow that row across to the Japanese Yen column. The intersecting cell gives the pair’s percentage change.