USD/JPY trades near 158.30 as safe-haven demand for the US Dollar outweighs Yen strength ahead of Friday's critical US Nonfarm Payrolls release.
The pair bounced from 157.26 lows to around 158.30 and is on track for a second straight weekly gain as safe-haven demand lifts the US Dollar amid a tech-led equity rout. A consensus-beating NFP print (expected 65K vs 29K prior, due Fri Nov 06 at 13:30) could reinforce December Fed rate-hike bets, pushing the pair higher, though the BoJ's own December hike expectations cap upside and the pair remains stuck in a four-week range.
The consensus foresees 65K new US jobs in October, up from 29K in September, with the report due Friday November 06 at 13:30. A high reading is generally bullish for the US Dollar, which would support USD/JPY, while a low reading is bearish.
Although the Yen usually benefits from risk aversion, the US Dollar is attracting even stronger safe-haven demand amid the tech-led equity rout, and investors are bracing for a strong US NFP report, so the Yen has given back its earlier gains.
The Yen reversed earlier gains as the US Dollar attracts stronger safe-haven flows in the risk-off session and traders position for a strong US NFP (65K consensus vs 29K prior) that could back another Fed hike in December. However, expectations that the BoJ will keep tightening, with a December rate hike firmly on the table after September meeting minutes, limit the downside for the currency.
Yes, a December rate hike is firmly on the table, and the minutes of September's BoJ meeting showed policymakers saw the need for further interest rate hikes, with some calling for a steeper tightening cycle.
A weaker-than-expected US NFP report would be bearish for the US Dollar, and Japanese investors bringing money home or increasing FX hedging on overseas assets could fade an important source of structural JPY selling, per OCBC.
The Japanese Yen surrendered earlier gains as the US Dollar attracted safe-haven flows amid a tech-led equity market rout. Investors are now focused on the upcoming US Nonfarm Payrolls report, with consensus expecting 65,000 new jobs. While the USD remains supported by potential December Fed rate-hike bets, the Yen is underpinned by expectations of a Bank of Japan rate increase in December.
The NFP report is a primary driver of USD volatility. A print exceeding the 65K consensus is generally bullish for the US Dollar, potentially reinforcing expectations for a December Fed rate hike and pushing USD/JPY higher.
While the Yen is a traditional safe-haven asset, the US Dollar is currently attracting stronger demand due to the specific nature of the tech-led equity rout and anticipation of a strong US labor market report.