Japanese Yen drops to weekly low as elevated US bond yields lift USD to two-month high
The USD/JPY pair builds on the previous day's bounce from the 156.40-156.35 region, or a one-and-a-half-week low, and gains strong follow-through traction during the Asian session on Thursday.
The Japanese Yen (JPY) reached a weekly low against the US Dollar (USD) on Thursday, as elevated bond yields bolstered the USD to a two-month high. The USD/JPY pair surged beyond the 158.00 level, driven by strong bullish sentiment around the USD. Market expectations for an October Federal Reserve rate hike were dampened by a weaker-than-anticipated Personal Consumption Expenditures (PCE) report for August.
Meanwhile, US bond yields remained elevated due to oil-driven inflation risks and geopolitical tensions between the US and Iran. US President Donald Trump's refusal to accept Iran's ceasefire proposal and his potential return to combat after the November midterm elections further fueled the safe-haven USD. The Bank of Japan's anticipated rate hike in October or December could limit JPY losses and prevent USD/JPY from reaching higher levels.
Traders are closely monitoring the US economic calendar, including the Weekly Initial Jobless Claims, ISM Manufacturing PMI, and influential FOMC members' speeches, with the upcoming Nonfarm Payrolls (NFP) report on Friday expected to provide significant clues about the Fed's policy direction.
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