Dollar-yen surged briefly before plunging after the release of August U.S. employment data, then returned to range-bound trading. With monetary policy announcements in Japan and the U.S. due this week, market activity is expected to remain subdued because of a U.S. holiday.
In New York trading on the 4th, dollar-yen surged briefly to ¥156.75 following the U.S. employment report, but then plunged to ¥155.36 before ending in the low ¥156 range. Movements in long-term interest rates intersected with renewed yen buying.
The U.S. Department of Labor reported that August nonfarm payrolls increased by 162,000 from the previous month, significantly exceeding market expectations and reviving expectations of monetary tightening by the Federal Reserve. Dollar buying initially prevailed, but once that buying subsided, renewed yen buying intensified.
With expectations of an additional Bank of Japan rate hike and concerns over Japanese intervention to buy yen influencing the market, the tug-of-war over monetary policy in Japan and the U.S. continues. While Federal Reserve officials remain divided between views favoring a rate cut and those favoring no change, the probability of a rate hike at the next FOMC meeting and the timing of the U.S. PPI and CPI releases are among the market's main focuses.
Although the number of market participants is expected to decline this week because of a U.S. holiday, downside support in the ¥155 range has held firm, and nervous trading is expected to continue ahead of U.S. inflation data and policy announcements in Japan and the U.S. The euro-dollar pair also moved toward a weaker dollar at times, but overall, trading was expected to lack a clear direction.