Yen Strengthens Against Dollar Amid Limited Market Activity
On Monday, the Japanese yen (JPY) gained strength against the US dollar (USD) as Japanese markets were closed for a public holiday, leading to lower volatility. As of now, the USD/JPY remained steady at approximately 154.18, just below an 8-1/2-month peak, while traders analyzed the latest manufacturing data from the US.
The recent surge in the greenback has slowed down after the Institute for Supply Management (ISM) revealed that U.S. factory activity has shrunk for the eighth month in a row in October. The manufacturing PMI came in at 48.7, falling short of the anticipated 49.5, suggesting ongoing weakness in production and new orders. The details showed production dip to 48.2 while employment saw a slight increase to 46, with prices paid dropping to 58.
Conversely, a report from S&P Global painted a somewhat more positive picture, indicating that the final U.S. manufacturing PMI improved slightly from 52 in September to 52.5 in October.
In response to this data, the US Dollar Index (DXY), which measures the dollar’s value against six major currencies, decreased, trading around 99.83 after reaching 99.99 earlier in the day.
Even with this modest decline, the dollar remains supported largely due to the Federal Reserve’s hawkish stance following a 25 basis point interest rate cut last week. The likelihood of another rate cut in December has dropped to about 65%, down from 94% the previous week, according to the CME FedWatch tool.
In Japan, the Bank of Japan (BOJ) held interest rates steady at 0.50% for the fifth consecutive time in their recent meeting. Governor Kazuo Ueda emphasized the need for clearer signs of sustainable wage growth before any policy changes, noting that the BOJ “would like to take some more time to assess how the impact of U.S. tariffs will affect the Japanese economy.”
As we look ahead, traders are likely to turn their attention to private sector data for short-term insights, especially as the ongoing US government shutdown is delaying major official updates. Key indicators to watch include Tuesday’s JOLTS job openings and Wednesday’s ADP employment changes, both of which are significant for understanding the labor market.
In Japan, updates on factory activity are expected from the October Jibun Bank Manufacturing PMI on Tuesday, followed by the release of the BOJ’s monetary policy meeting minutes on Wednesday.
