Japanese Yen Extends Rally as Markets Await US Data

The Japanese Yen (JPY) has seen a significant rally against its major rivals in the European session on Thursday, building on Wednesday's impressive gains. In the second half of the day, key US economic data will be released, including weekly Initial Jobless Claims and the Institute for Supply Management's (ISM) Services Purchasing Managers' Index (PMI) report for August.

The JPY has been the strongest currency this week, with a 1.99% gain against the USD and 2.31% gain against the GBP. The USD/JPY pair declined sharply during American trading hours on Wednesday, losing about 1% in under 30 minutes, although there was no official confirmation of any currency intervention.

Analysts at ING argue that both US and Japanese officials may be content with recent price action, but caution that policy dynamics still favor the Dollar in the near term. They note that a Fed hike in mid-September is likely to keep USD/JPY relatively bid this month, although any sustainable turn lower would require a more hawkish Bank of Japan.