Yen Soars on Strong Pay Data, Then Gives it Back

The Japanese Yen surged on the release of strong pay data in July, but unwound all its gains by the end of the day. The USD/JPY pair traded as high as 154.50, just shy of a key resistance level, after the data showed nominal cash earnings rose 4.7% against a 3.9% consensus, the fastest since January 1997.

The highest pay increase in decades was already priced into the market, and forecasts have followed the tape rather than led it. The published projections now cluster in the low 150s over the coming months on the assumption of moves in September and January, but the Yen has actually been the best-performing major currency this year.

The Bank of Japan's Governor said last week that a September move was on the table, but the current account swung to a ¥2.988 trillion surplus in July from a ¥92.3 billion deficit, which may give the central bank more room for maneuver.