The Japanese Yen (JPY) ended its four-day upward trend against the US Dollar (USD) on Thursday, as the USD/JPY pair rose during the US trading session. As of now, that pair is hovering around 147.25, showing an increase of about 0.12% for the day.
This rebound of the greenback seems more technical rather than fundamentally driven, and it appears to be attracting shorter-term gains. After hitting a weekly low, the dollar’s movement is somewhat restrained due to the ongoing uncertainty caused by the US government shutdown. It’s creating a cautious atmosphere among investors.
US economic advisor Donald Trump has indicated that prolonged closures could severely hinder economic growth. A memo from the White House, referenced by Politico, suggests that the US economy could lose approximately $15 billion in GDP each week due to the shutdown.
In parallel, the increasing anticipation for additional monetary policy easing from the Federal Reserve is also limiting the dollar’s upside potential. The previous day’s ADP employment data came in lower than expected, reinforcing speculations about rate cuts, particularly as the market seems focused on the upcoming FOMC meeting in October.
Compounding the situation, the outlook for the Fed has become more uncertain as governmental shutdowns threaten to disrupt important economic data. Notably, the Non-Agricultural Payroll (NFP) report due on Friday is likely to be delayed.
On the Japanese front, political dynamics are adding another layer of unpredictability as the ruling Liberal Democratic Party (LDP) is set to elect new leadership this weekend. This election is significant as it will essentially decide the next prime minister of the country.
As traders look ahead, they’re focused on the implications of the US government shutdown, especially with likely no NFP release on Friday. From Japan’s side, there are upcoming reports, including August’s unemployment rate and the September Japan Bank Services PMI. The comments from Governor Boji Kazuoudah may also provide valuable insights into future policy directions.
