USD/JPY drops below 147.50 on renewed USD weakness

USD/JPY made a sharp U-turn and declined below 147.50.
The US Dollar came under renewed selling pressure after the US CPI data.
Annual CPI inflation in the US rose to 2.9% in August.

Eren Sengezer FXStreet

After rising above 148.00 earlier in the day, USD/JPY made a sharp U-turn and turned negative on the day below 147.50. At the time of press, the pair was trading at 147.35, losing about 0.1% on a daily basis.

The renewed selling pressure surrounding the US Dollar (USD) seems to be causing USD/JPY to push south in the second half of the day.

The US Bureau of Labor Statistics (BLS) reported on Thursday that the annual inflation, as measured by the Consumer Price Index (CPI), climbed to 2.9% in August from 2.7% in July, as expected. On a monthly basis, the core CPI, which excludes volatile food and energy prices, increased by 0.3%, matching July's increase and analysts' estimate.

Other data from the US showed that the number of first-time applications for unemployment benefits jumped to 263,000 in the week ending September 6 from 236,000 in the previous week, reviving concerns over worsening conditions in the US labor market.

Following these data releases, the USD Index turned south and was last seen losing 0.25% on the day at 97.55, reflecting the broad-based USD weakness.

The US economic calendar will not feature any other high-impact data releases on Thursday. In the Asian session on Friday, July Industrial Production data from Japan will be watched closely by market participants.

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.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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