Yen Holds Firm as Weaker US Data and Rising Rate Hike Bets Take Toll on Dollar
The Japanese Yen saw little change in value against the US Dollar on Wednesday, despite broad weakness in the US currency. The USD/JPY pair traded around 157.65, a relatively flat day for the yen.
This stability comes as markets weigh weaker-than-expected US economic releases. According to ADP, the private sector added only 44K jobs in July, falling short of market consensus of 70K. The Institute for Supply Management's Services Purchasing Managers Index also came in slightly below expectations at 54.1.
Meanwhile, a signal from recent official action has reinforced the yen's support. US Treasury Secretary Scott Bessent confirmed that as part of Friday's joint intervention with Japan, the US bought yen for euros, rather than buying yen and selling dollars. This stance significantly raises the cost of fighting a stronger yen and puts a much firmer ceiling on USD/JPY.
Strategists at Brown Brothers Harriman note that USD/JPY is holding just under its 200-day moving average (158.04) as stronger wage data in Japan bolster expectations for further BoJ tightening. Implied odds of a 25bps BoJ rate hike to 1.25% at the next September 18 meeting rose to 60% from nearly 40% ahead of the wage data.