The US Dollar continued its losses against the Japanese Yen, reaching 147.00, after a decline of around 2% over the past four days, due to pressures from the potential US government shutdown and weak labor market data. These factors have contributed to the pressure on the dollar this week, while in Japan, the Bank of Japan’s hawkish tone and strong business confidence data have boosted expectations of an imminent interest rate hike.
The dollar’s decline marked its fourth consecutive day of losses against the yen, testing its lowest levels in six weeks near the 147.00 mark, driven by a mix of concerns over the US government shutdown and the Bank of Japan’s monetary policy meeting minutes, which leaned towards tightening. A summary of opinions released by the bank on Tuesday revealed that some members believe the time for taking further steps towards tightening monetary policy is near, increasing expectations of a potential rate hike in October or December.
Additionally, Tuesday’s Tankan survey results provided further support for this trend, showing an improvement in Japanese manufacturing sector confidence for the second consecutive quarter, though at a slower pace than expected, with reduced concerns about the negative impact of tariffs imposed by former US President Donald Trump.
Meanwhile, US labor market data showed weakness, with the JOLTS job openings report coming in below expectations, along with continued uncertainty due to the US government shutdown, which fueled expectations that the Federal Reserve may need to provide further support to the labor market, adding pressure to the US dollar.
Markets are expected to focus later today on the ADP private sector employment report and the ISM manufacturing PMI, which are likely to provide additional insights into the Federal Reserve’s monetary policy direction in the near term.
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