Japanese Yen weakens on political uncertainty, receding safe-haven demand
The Japanese Yen (JPY) retreats further from a two-week top touched against a broadly recovering US Dollar (USD) the previous day and is pressured by a combination of factors. Data released earlier today showed that the Unemployment Rate in Japan rose more than expected, to 2.6% in August.
Adding to this, the upbeat market mood – despite the US government shutdown – and domestic political uncertainty undermine the safe-haven JPY. This, along with some follow-through USD buying, assists the USD/JPY pair in building on Thursday's bounce from the vicinity of mid-146.00s, or the 100-day Simple Moving Average (SMA) support.
Meanwhile, investors seem convinced that the Bank of Japan (BoJ) will stick to its policy normalization path and hike interest rates in October, which could act as a tailwind for the JPY.
Moreover, hawkish BoJ expectations mark a significant divergence in comparison to bets that the US Federal Reserve (Fed) will lower borrowing costs two more times by the end of this year. The latter might keep a lid on any meaningful USD appreciation. Furthermore, the narrowing US-Japan rate differential could lend support to the lower-yielding JPY. Traders now look to speeches from influential FOMC members for some impetus heading into the weekend.
Source: FXstreet
