Yen price increased the most in 4 months

The yen rose against the US dollar as US jobs data was weaker than expected and investors speculated that Japanese authorities were about to intervene.

In the trading session on July 7, the yen price increased by 1.4% against the US dollar, reaching 142 JPY per USD. This is the strongest increase since March.

The dollar fell as data from the US Labor Department showed that the country created the fewest jobs in 2.5 years in June. The number of new jobs in April and May also fell.

"This week, risk-off sentiment has dominated the market. Investors are also worried that Japanese authorities are about to intervene in the currency market," Joe Manimbo, a senior market analyst, told Reuters.

The USD/JPY exchange rate movement since the beginning of the year shows that the Japanese Yen has been continuously weakening recently.

The yen has weakened since mid-June, after the Bank of Japan (BOJ) announced on June 16 that it would keep its short-term interest rate unchanged at -0.1% and its 10-year bond yield cap at 0%. This move, in contrast to the European Central Bank (ECB) and the US Federal Reserve (Fed), caused investors to sell the currency and switch to other channels for higher returns.

The yen has been one of the worst-performing currencies this year. Last month, it traded at 145 yen per US dollar – a level not seen since November last year.

Yesterday, Eisuke Sakakibara – former Japanese Vice Minister of Finance from 1997 to 1999 predicted that the yen could hit a three-year low against the US dollar, at 160 JPY per USD. At this level, he said, Japanese authorities may intervene to support the local currency.

This week, Japan's Labor Ministry also announced that May wages rose the most since early 1995. This further reinforced the view that the Bank of Japan (BOJ) will have to change its current ultra-loose monetary policy.

“They have been very clear that if there is evidence of stronger, more sustainable wage growth, they will be more confident that they can hit their inflation target and move away from loose monetary policy,” said Lee Hardman, strategist at MUFG.

Ha Thu (according to Bloomberg, Reuters)

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