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USD/JPY slips after US payrolls lift Fed hike odds

With Tokyo fixed at a 1% policy rate, the BoJ rate path shift is what left USD/JPY vulnerable even as the dollar gained on the payrolls beat.

Reported · Written up by our desk · Major Pairs

USD/JPY traded just above 154.00 after falling roughly two yen on Monday, extending its move to a fresh six-month low, even though US payrolls came in stronger than expected. FXStreet said nothing in the move confirms Japanese intervention, and that Tokyo reportedly has no specific level left to defend at current six-month yen highs.

FXStreet attributed the broader shift to changes in the Bank of Japan rate path, rather than a carry unwind led by yen crosses. The newsletter cited US payrolls of 162K versus a 53K consensus, with June and July revised higher, and unemployment steady at 4.1%, which boosted Federal Reserve hike odds for the September 15-16 meeting to 58% from 49.4%.

Even so, FXStreet said USD/JPY did not follow the typical pattern of widening a rate differential, since the pair lost about two yen after the data. The outlet also pointed to US bond yields moving first, with the two-year Treasury yield reaching its highest since January 2025.

FXStreet added that Japan’s policy rate has been at 1% since June, while what changed over the past fortnight was the expected cadence of future moves. It said swaps are pricing about a quarter point hike on September 18 at close to 97%, with October at roughly a one-in-four chance, and noted that the bond market has already moved ahead as Japanese JGB yields have cleared key levels.

Latest closeUSD/JPY 158.82 ▼0.9%

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