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USD/JPY extends losses for a third day on broad Greenback softness

  • USD/JPY extends losses for the third straight day as the Greenback drifts lower.
  • Escalating US-China trade frictions deepen market caution, keeping demand tilted away from the Greenback.
  • Fed rate cut expectations remain firm, with markets fully pricing in back-to-back 25 bps reductions in October and December.

The Japanese Yen (JPY) extends its winning streak for a third consecutive day against the US Dollar (USD) on Thursday, as the Greenback slides to a multi-day trough amid lingering concerns over the prolonged US-China trade standoff. At the time of writing, USD/JPY is trading around 150.35, down 0.45% on the day.

The escalating tensions between Washington and Beijing continue to weigh on risk sentiment after both sides unveiled fresh retaliatory measures. Markets remain on edge as the prolonged United States (US) government shutdown adds another layer of uncertainty to an already fragile macro backdrop.

Adding to the Dollar’s woes, investors maintain firm expectations of further monetary policy easing by the Federal Reserve (Fed) in the months ahead. According to the CME FedWatch Tool, markets are pricing in back-to-back 25-basis-point rate cuts at the October and December meetings.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading near its lowest level since October 7, around 98.41, broadly pressured across major peers.

Meanwhile, in Japan, growing political uncertainty following the collapse of the long-standing LDP-Komeito coalition has left newly elected LDP leader Sanae Takaichi struggling to form a governing alliance, with ongoing negotiations with the Japan Innovation Party (JIP). The uncertain political backdrop could limit further JPY gains until the situation stabilizes and the outlook improves.

Separately, the International Monetary Fund (IMF) urged the Bank of Japan (BoJ) to proceed “very gradually” with policy normalization, emphasizing the need to maintain flexibility given fragile global conditions. The Fund also advised Tokyo to strengthen fiscal discipline and avoid untargeted stimulus amid mounting debt pressures.

Author

Vishal Chaturvedi

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

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