USD/JPY recovers from the recent losses near 149.00, eyes on US NFP data

USD/JPY recovers from the recent losses, trading higher around 148.90 during the early European session on Friday. The pair finds support on the upside, which could be attributed to the rebound in the US Dollar (USD) following improved US Treasury yields.

Japan’s Labor Cash Earnings (YoY) remained consistent at 1.1% in August, contrasting with the market expectations of 1.5%.

Former Federal Reserve Vice Chair Clarida suggests that the Bank of Japan (BoJ) policy rate could experience an increase to 0% by early 2024. The recent changes under the new leadership of Governor Kazuo Ueda, including a significant adjustment in July to the yield curve control (YCC) strategy, indicate a shift in the BoJ's approach.

Japanese Finance Minister Shunichi Suzuki reiterated on Thursday his decision not to comment on whether Japan intervened in the foreign exchange (FX) market. The ongoing speculations about potential intervention by Japanese authorities in the foreign exchange market to bolster the domestic currency could persist as a headwind for the USD/JPY pair.

Moreover, BoJ Governor Kazuo Ueda emphasized that the current policy framework has a significant stimulative impact on the economy. Ueda reiterated the central bank's basic stance of patiently maintaining monetary easing.

The US Dollar Index (DXY) rebounds and trades higher around 106.50 as of now. The Greenback’s correction comes after reaching an 11-month high earlier this week.

US Treasury yields hold steady, maintaining their positions near multi-year highs. Market participants are exercising caution due to the US Federal Reserve's (Fed) hawkish stance on the trajectory of interest rates.

The 10-year US Treasury yield remains above 4.70%, close to its highest level since 2007.

US Initial Jobless Claims for the week ending September 29 saw an increase to 207K from the previous reading of 205K. Surprisingly, this surpassed the market expectation of 210K.

US Challenger Job Cuts have significantly decreased from 75.151K to 47.457K in September. Market participants watch for the upcoming release of US Nonfarm Payrolls and Average Hourly Earnings on Friday.

These figures will serve as a confirmation of the tight labor market, and upbeat numbers could potentially trigger a rise in the USD and elevate volatility in the bond market.