Japanese Yen trims gains as downbeat foreign trade data offsets US Dollar’s weakness

The Japanese Yen (JPY) experienced a slight decline on Friday, despite the US Dollar (USD) showing weakness. The USD/JPY pair opened at 158.60 prior to the US market's start after having risen from session lows of 158.03. This movement was driven by a widening Japanese Merchandise Trade Balance, which was revealed through data published on Thursday by Japan's Ministry of Finance.

The trade deficit jumped to JPY634.5 billion in the previous month, compared to the JPY409 billion shortfall in June, largely due to a 27.8% increase in imports, resulting from higher energy and semiconductor prices in July. This data came in the wake of disappointing Japanese Gross Domestic Product (GDP) figures released earlier in the week, which cast doubt on the Bank of Japan's (BoJ) capacity to accelerate its monetary tightening cycle, thereby adding bearish pressure on the Yen.

However, the Yen managed to gain 0.9% on Wednesday, as the US Dollar dropped across the board following the US Treasury's plan to double liquidity support for longer-dated securities, totaling $4 billion per auction from the current maximum of $2 billion. This measure aimed to ease pressure on US long-term Government Bonds, as the yield on the 30-year note peaked at a 19-year high of 5.33% earlier this week.

National debt surpassed $40 trillion, causing investors to demand higher compensation and prompting bondholders to seek better returns. In the coming days, traders will focus on US data and Middle East headlines for additional trading momentum.