Yen gets some relief as dollar pulls back after private payrolls report

The yen received some relief on Thursday as the dollar settled back and U.S. Treasury yields moderated. Mixed U.S. economic data overnight caused investors to reduce their bets on the Federal Reserve raising interest rates again this year, leading to a decline in the dollar index. The greenback gave up some of its recent gains after U.S. private payrolls increased less than expected in September, signaling a potential cooling in the labor market. However, analysts noted that more evidence is needed to determine the pace at which the labor market is cooling.

Longer-dated U.S. Treasury yields eased from 16-year highs after the data was released and remained lower in the Asian morning. Currency strategist Moh Siong Sim mentioned that there are indications that the U.S. labor market is cooling down further, but it is still too early to draw conclusions. He highlighted that overall U.S. growth has been slowing, but at a slower rate than expected. The dollar/yen pair, which is sensitive to U.S. yields, traded around 148.43, down almost 0.5% from late U.S. levels. This pushed the yen further off its weakest level since October 2022.

Questions arose about possible intervention by Japanese authorities after the yen sharply recovered after breaching the 150-line. Speculation grew that Japanese authorities had intervened to support the currency, but Bank of Japan money market data indicated that Japan most likely had not intervened. Finance Minister Shunichi Suzuki declined to comment on whether Tokyo had stepped in, reiterating that currency rates must move stably reflecting fundamentals.

The yen also drew support from a drop in oil prices overnight. However, this is expected to be a short-term reprieve as oil prices inched up in early Asian trade, clawing back some of the previous session’s losses. In other currency news, the euro was up 0.18% so far in Asia, the pound sterling steadied, the Australian dollar rose over 0.5% in early trade, and the New Zealand dollar also ticked up 0.5% against the greenback.

Overall, the yen received relief as the dollar settled back and U.S. Treasury yields moderated. Mixed U.S. economic data caused investors to reduce their expectations of the Federal Reserve raising interest rates again this year. The situation will be closely watched as the labor market continues to cool and the overall U.S. growth slows.