USD/JPY trades sideways as intervention risk and US jobs data loom

USD/JPY trades around 156.30 on Thursday at the time of writing, down a modest 0.05% on the day, as the Japanese Yen (JPY) remains supported by speculation that Japanese authorities could step into the market to curb the currency’s weakness.

Japan’s top foreign exchange official, Atsushi Mimura, said on Thursday that authorities stand ready to respond to speculative moves in the foreign exchange market. He also stated that he was closely monitoring currency markets while declining to comment directly on possible intervention or specific USD/JPY levels.

These comments come after several recent warnings from Japan’s Ministry of Finance. Finance Minister Satsuki Katayama repeated last week that Japan was prepared to take action against excessive speculative moves in the Japanese Yen. This rhetoric keeps investors on edge after the recent sharp moves seen in USD/JPY, widely interpreted as official intervention.

Meanwhile, the Bank of Japan (BoJ) March meeting minutes released on Thursday showed that many board members see the need for additional rate hikes if the energy shock linked to the US-Iran war persists and fuels second-round inflation effects. Some policymakers also argued that the central bank should soon adjust its deeply negative real interest rates.

This more hawkish BoJ tone reinforces market expectations for a possible rate hike as soon as June, although several analysts remain cautious about the central bank’s ability to provide lasting support to the Japanese Yen without a parallel decline in US yields or Oil prices.

OCBC strategists Sim Moh Siong and Christopher Wong believe that recent USD/JPY moves bear the signature of Japanese intervention, adding that the key trigger level now appears closer to 158 rather than 160. According to them, further intervention could push the pair toward the 150-155 area, although they stressed that intervention alone would likely not be enough to reverse the broader trend without a more aggressive BoJ policy stance.

On the US side, market focus now turns to the April US employment report due on Friday. Economists expect 60K Nonfarm Payrolls (NFP) additions, while the Unemployment Rate is projected to remain steady at 4.3%. Investors will also closely watch the weekly Initial Jobless Claims report due later on Thursday.

The US Dollar (USD) remains broadly under pressure, with the US Dollar Index (DXY) trading near two-month lows around 97.90. Markets continue to price in a more accommodative stance from the Federal Reserve (Fed), limiting the Greenback’s upside potential against the Japanese Yen.