USD/JPY Slumps as Fed and BOJ Rate Hike Expectations Offset

The US dollar against the Japanese yen (USDJPY) has been in a downward trend since late July, dropping nearly 5% to below 155.50 as of September 7.

This decline is largely due to shifting monetary policy expectations for the central banks of the U.S. and Japan.

The strong employment data from the US August nonfarm payrolls report released last Friday eased market concerns over a rapid cooling of the U.S. economy, giving the Federal Reserve more room to continue raising interest rates.

However, the extent of the rebound was limited due to policy expectations for the Bank of Japan also shifting towards the hawkish side.