Robust US jobs data fails to halt Japanese yen gains

158.25 is the level USD/JPY retreats towards in early Asian trading on Monday.
Minutes from the BoJ meeting signalled readiness among policymakers to step up monetary tightening.
October US NFP increased by 165,000, while the Unemployment Rate declined to 4.1%.

158.25 is the level USD/JPY slips towards. In Monday’s early Asian session, the Japanese Yen (JPY) strengthens slightly against the US Dollar (USD). Minutes from the Bank of Japan (BOJ) meeting signal that policymakers are ready to quicken the pace of monetary tightening.

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

Market expectations of a December rate increase strengthened after the BoJ left rates unchanged last month but reiterated its determination to address inflation risks. Minutes of the September meeting, published on Thursday, showed broad agreement among BoJ policymakers that additional rate rises would be appropriate as underlying inflation moved closer to the central bank’s 2% target.

A December interest rate increase is expected from the central bank, former BoJ top economist Seisaku Kameda said on Friday. He added that borrowing costs were expected to rise further next year until they reach 2%, countering growing inflationary pressure.

October US Nonfarm Payrolls (NFP) increased by 165,000, substantially exceeding the forecast gain of 65,000, according to figures released on Friday by the US Bureau of Labor Statistics (BLS). September had recorded an increase of 60,000. The US Unemployment Rate declined from 4.2% in September to 4.1% in October.

A December interest rate increase by the Federal Reserve (Fed) remains on course following the stronger-than-forecast US employment report. Kathy Bostjancic, chief economist at Nationwide, said: "The labor market is heating up across-the-board and supports our view that the Fed will raise the policy rate again in December,"

The probability of a rate increase at next month’s US central bank meeting rose to roughly 79.6% in financial market pricing, according to the CME FedWatch tool. Before the US employment report, the probability stood at 72.8%.

0.5% Yen rise reflects haven demand and BoJ normalisation expectations

During the latest risk-off episode, ABN Amro strategists observed that “haven demand favoured the JPY over the USD”. Their assessment was that the “DXY Index was unchanged at 101.6 despite the equity rout, as falling US yields eroded the greenback’s appeal.” For the Yen, domestic policy signals reinforced the support from safe-haven inflows. ABN Amro noted that “the JPY appreciated by 0.5% to 157.70 per USD, underpinned by the Bank of Japan minutes, which reinforced expectations of further normalisation.”

8/10 Daly reading reinforces hawkish Fed outlook as inflation takes priority

An FXS Speechtracker score of 8/10, against the established baseline of 6.4/10, captures a distinctly more hawkish message from the Fed’s Daly and a greater emphasis on tightening risks. Her central remarks describe the employment report as “good news” and wage growth as something that “isn’t booming,” but point to falling real wages and inflation that has been “high for too long,”. Inflation therefore ranks as the number 1 priority, warranting additional policy tightening despite labour market resilience. Daly argues that labour market strength gives the Fed room to act and signals willingness to increase rates if necessary. That combination favours a stronger DOLLAR bias and maintains pressure on risk assets.

A 0.95-point increase took the FXS Fed Sentiment Index to 143.10, comfortably above the neutral threshold of 100. The firmly hawkish reading is consistent with the elevated FXS Speechtracker score. Although uncertainties involving tariffs, war and AI are acknowledged, the increase indicates that markets chiefly see the Fed as leaning towards further tightening. That policy backdrop should keep supporting the DOLLAR against the EURO and YEN.

Technical Analysis: 100-day SMA limits USD/JPY upside

On the daily chart, a narrow trading range keeps USD/JPY just below the 100-day Simple Moving Average (SMA) and above the middle line of the Bollinger Bands. The overall bias remains range-bound: the upper Bollinger Band and the 100-day SMA constrain gains, while a Relative Strength Index (14) reading of 52.93 points to modestly positive momentum without a clear direction.

Resistance first comes into view at the upper Bollinger Band near 158.95, ahead of the 100-day SMA at 159.05. A daily close above the latter would be required to open the way for a more decisive upward move. Initial downside support sits at the middle Bollinger Band at 157.95, followed by the lower band around 156.95. A break beneath that lower boundary would bring a broader corrective phase into focus for the pair.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Japanese Yen: Key Questions

Which forces shape the Japanese Yen’s value?

Among the world’s most actively traded currencies, the Japanese Yen (JPY) broadly reflects the performance of Japan’s economy. More specific influences include Bank of Japan policy, the gap between Japanese and US bond yields, and traders’ appetite for risk, alongside other factors.

Why do Bank of Japan decisions matter for the Yen?

Currency control is part of the Bank of Japan’s mandate, making its actions important for the Yen. At times, the BoJ has intervened directly in foreign exchange markets, usually to weaken the currency. Such intervention is infrequent, however, because of political concerns among Japan’s principal trading partners. Between 2013 and 2024, the BoJ’s ultra-loose monetary policy drove Yen depreciation against its major peers as the policy gap with other leading central banks widened. The subsequent gradual withdrawal of that ultra-loose stance has provided the Yen with some support.

What does the US-Japan bond yield gap mean for the Yen?

The BoJ’s commitment to ultra-loose monetary policy over the past decade widened its policy divergence from other central banks, especially the US Federal Reserve. This helped expand the yield gap between 10-year US and Japanese bonds, supporting the US Dollar relative to the Japanese Yen. That gap is now narrowing as other major central banks cut interest rates and the BoJ follows its 2024 decision to move gradually away from ultra-loose policy.

Why does risk sentiment influence the Japanese Yen?

Investors commonly regard the Japanese Yen as a safe haven. During periods of market stress, its perceived stability and reliability make investors more inclined to allocate funds to the currency. As a result, turbulence is likely to lift the Yen against currencies considered riskier investments.