Yen Strengthens, Market Awaits US Non-Farm Payrolls Data
The Japanese yen maintained its strength on Wednesday, supported by a rally in the Japanese stock market and investor confidence that Prime Minister Sanae Takaichi's landslide victory provides stronger political space to implement what is considered a more disciplined fiscal policy. Meanwhile, the US dollar fluctuated ahead of the release of US employment data (Non-Farm Payrolls/NFP) scheduled for today.
The yen strengthened 0.1% against the dollar to 154.22, extending its gain of around 1% in the previous session. The yen also showed strong movement against other currencies: the euro was around 183.60 yen, while the pound weakened to around 210.17 yen. Trading in Asia tended to be quieter due to the Japanese market holiday.
Several analysts believe that Takaichi's landslide victory has given the market greater confidence that the government can formulate a more consistent and measured fiscal policy. With stronger "political capital," the government is seen as less likely to compromise in designing spending and stimulus plans. Foreign capital inflows into Japanese stocks also increased demand for the yen, as investors needed the yen to purchase Japanese assets.
In terms of prospects, some market players see the potential for USD/JPY to move lower if the US-Japan yield gap continues to narrow and if investors become more confident that Japan's fiscal policy will not be too loose. One view suggests that USD/JPY could potentially approach the 150 area if the market believes Takaichi is truly moving towards a more responsible fiscal stance.
Meanwhile, the main global focus remains on the US Nonfarm Payrolls (NFP) release. Consensus estimates job gains of around 70,000 in January, with the unemployment rate remaining at 4.4%. Ahead of the data, the dollar was under pressure after disappointing US retail sales and slowing labor cost growth. The market now expects the Fed to ease policy by around 60 basis points through December, although some officials are still open to holding interest rates longer. (asd)
Source: Newsmaker.id
