USD/JPY rises as Japan’s verbal intervention lifts yen, but economic challenges persist
Mixed signals in the U.S. and Japan keep USD/JPY steady
Mixed signals from both the U.S. and Japan keep USD/JPY on the edge. The pair continues to consolidate in a range, holding just between 155.00 and 151.70.
In Japan, authorities have intervened verbally, aiming to curb excessive decline in the yen. While this has yielded some gains in the Yen, renewed buying interest in the U.S. dollar, coupled with sustained high U.S. bond yields may be preventing any significant downward movement for USD/JPY.
Japan's economic fundamentals present further challenges for the yen. September's household spending report revealed a second consecutive monthly decline, falling 1.3% in September and down by 1.1% from the prior year, pointing to weakened consumer activity. This follows a similar decline in inflation-adjusted wages, highlighting the struggle Japan faces in lifting consumer sentiment and economic momentum. These signals could complicate the Bank of Japan's already cautious approach to rate hikes, placing more reliance on verbal intervention to manage the yen’s stability.
Japan economic outlook limits the yen safe-haven appeal
Meanwhile, Japan’s government remains vigilant. Chief Cabinet Secretary Yoshimasa Hayashi emphasized the government's close monitoring of FX moves, with Finance Minister Katsunobu Kato echoing a heightened sense of urgency in observing the impacts of the U.S. election outcomes on Japan’s economy. Additionally, Vice Finance Minister Atsushi Mimura reinforced the government’s readiness to step in against excessive FX volatility. Despite these statements, the yen’s appeal as a safe-haven asset seems limited, largely due to Japan's subdued economic outlook.
For now, the yen is gaining strength against the dollar causing USD/JPY to extend Thursday's decline which is now trading near 152.100. The pair still remains within a two-week range at the mercy of mixed cues while traders anticipate the next moves from both Japan’s authorities and the Federal Reserve.
The Yen is facing an uphill battle against the dollar. Hints of the Japanese government intervention have provided temporary relief for the yen.
