Japanese Yen pares gains amid US Dollar recovery from election shock

• USD/JPY recovers from a session low of 157.80 to 158.40, remaining within its earlier trading ranges.
• Strong US economic figures are gradually drawing market attention away from the midterm elections, leaving Dollar bears with less momentum.
• Hopes of additional monetary tightening in December received support from the BoJ's monetary policy minutes.

Robust US economic data have returned to the spotlight as the dust settles after the midterm elections, helping the US Dollar (USD) rebound from highs on Thursday. Against that backdrop, the Japanese Yen (JPY) has surrendered most of its earlier gains. Having recovered from session lows near 157.80, USD/JPY is back around 158.40.

Lower Oil prices and retreating US Treasury yields in the wake of the US midterm election outcome continue to put considerable pressure on US Dollar bulls. Yet the selling momentum seen on Wednesday and in Thursday's Asian session appears to be fading on Thursday. Markets are digesting the election results and turning their attention towards encouraging US economic figures.

US data point to robust economic momentum

October's net job gains reached 86K, according to Wednesday's ADP Employment report, exceeding the market forecast of 69K. The release followed strong JOLTS Job Openings figures on Thursday, which have raised expectations of a robust Nonfarm Payrolls report on Friday.

Wednesday also brought the  US ISM Services Purchasing Managers' Index (PMI), which eased modestly from 54.9 in September to 54.5 in October. Even so, the reading remained consistent with solid activity in the sector, alongside rising employment and price pressures holding at elevated levels. A comparable picture emerged from Monday's ISM Manufacturing PMI, while Tuesday's Factory Orders exceeded forecasts.

With these releases reinforcing market expectations of another quarter-point interest rate increase by the Federal Reserve at its December meeting, investors are reluctant to take large short positions in the US Dollar.

Meanwhile, minutes from the Bank of Japan's (BoJ) September monetary policy meeting showed that policymakers consider further interest rate increases necessary. Some advocated a steeper tightening cycle, reinforcing expectations of another rise in December. Following the release, the Yen made modest gains, only to give way to US Dollar strength during the European session.