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Japanese yen strengthens as weak US jobs data cuts Fed hike odds

USD/JPY fell toward 157.4 after Nonfarm Payrolls dropped 23K in July, and Fed hike odds for September weakened sharply, while Japan pledged coordinated FX intervention if needed.

Reported · Written up by our desk · Major Pairs

USD/JPY slid toward 157.40, down 0.65% on the day, as the US dollar came under pressure after a much weaker-than-expected US employment report. FXStreet links the move to investors scaling back expectations that the Federal Reserve will tighten policy in September.

The Bureau of Labor Statistics data showed Nonfarm Payrolls declined by 23K in July versus a market expectation for an 80K increase. Revisions lowered prior months further, with June payrolls revised down from 57K to 20K and May from 129K to 63K, for a combined downward revision of 103K jobs.

Despite the payroll deterioration, the unemployment rate edged down to 4.1% from 4.2%, and annual average hourly earnings growth slowed to 3.2% from a revised 3.4%. FXStreet adds that labor force participation slipped to 61.4% from 61.5%, reinforcing the view that the labor market is cooling.

On the Japanese side, Japan’s Ministry of Finance confirmed that the US and Japan jointly intervened in the foreign exchange market to counter excessive yen weakness, and Finance Minister Satsuki Katayama said Japan would not hesitate to carry out more intervention with the US if necessary. FXStreet also cites BBH’s view that the coordinated intervention and officials’ warnings raise the cost of fighting a stronger yen, and notes Japan had $1.09 trillion in currency reserves at the end of July.

Latest closeUSD/JPY 158.52 ▲0.6%

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