USD/JPY Pauses Amid NFP Jitters as BoJ Rate Hike Expectations Rise

The US Dollar (USD) has experienced a modest intraday recovery against the Japanese Yen (JPY), reaching the 156.50 area during the Asian session on Friday.

This move comes ahead of the crucial US Nonfarm Payrolls (NFP) report, which will be closely watched for cues about the Federal Reserve's (Fed) policy path and its impact on the USD.

US bond yields have pushed lower after Fed Governor Christopher Waller expressed optimism that inflation is slowing, reducing bets for a rate hike in September. This may limit any meaningful upside for the buck and the USD/JPY pair.

Meanwhile, traders have fully priced in a 25 basis point (bps) rate hike at the September 17-18 Bank of Japan (BoJ) meeting, contributing to capping the USD/JPY pair.