The Japanese yen rose in the Asian market on Thursday against a basket of major and minor currencies, extending gains for the third consecutive day against the U.S. dollar, hitting a four-week high, after the release of Japanese wage data, which provides more room for the Bank of Japan to raise interest rates for the third time this year.
The Japanese currency also supports the current weakness in the yield on ten-year US Treasury bonds, after the US job opportunities data boosted the chances of the Federal Reserve cutting interest rates by about 50 basis points in September.Price outlook • Japanese yen exchange rate today: The dollar fell against the yen by 0.4% to (143.18 ¥) the lowest since August 5, from the opening price of trading today at (143.73 ¥), and recorded the highest level at (143.90 ¥).
The Japanese yen rose 1.2% against the U.S. dollar on Wednesday, the second consecutive daily gain, the biggest daily gain since Aug. 23, due to risk aversion and strong demand for safe havens amid global equity losses.
Japan’s Labor Ministry said on Thursday that total monthly cash income and a separate set of full-time wage figures rose 3.6 percent annually in July, higher than economists’ expectations for a 3.0 percent rise, and cash income recorded a 4.5 percent rise in June.
Japan’s real wages rose 0.4 percent year-on-year in July, rising for the second consecutive month after a 1.1 percent rise in June.
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Japan’s current wage levels are undoubtedly increasing inflationary pressures on BoJ’s monetary policymakers, boosting the chances of further increases in Japanese interest rates this year.
Strong wage data gives the Bank of Japan more room to raise interest rates for the third time this year, increasing pressure on curry-yen deals and leading to further declines in Japanese stocks.
Bank of Japan board member Hajime Takata said the central bank should continue to raise interest rates if it can confirm that companies will continue to increase spending and wages.
Traders still see less opportunity to raise Japanese interest rates at the Bank of Japan meeting in October, with the odds of a third Japanese interest rate hike in December rising to 90%.
US Bond YieldThe yield on the ten-year US Treasury bond traded on Thursday near four-week lows of 3.753%, which is putting heavy pressure on US dollar levels in the foreign exchange market.
Data released on Wednesday showed that U.S. jobs fell in July to a three-and-a-half-year low, suggesting the U.S. labor market lost momentum.
Wells Fargo’s economists said in a note: July’s job opportunities data showed little sign of an end to the ongoing slowdown in the U.S. labor market.
Experts added: For the Federal Reserve, the data confirms that the labor market is no longer a source of inflationary pressures on the US economy.
Following these data, according to CME Group’s Feed Watch: the pricing of the prospects of cutting US interest rates rose by about 50 basis points at the September meeting, stable from 41% to 45%.
