Dollar-buying pressure emerged following the deterioration in the US September employment report, but USD/JPY is expected to test the 158 yen range depending on long-term yield movements and the US ISM non-manufacturing report.
In the New York market, the September employment report was released. Nonfarm payrolls increased by +29,000 month on month, below the forecast of 88,000, the unemployment rate worsened to 4.2%, and average hourly earnings increased by +0.1% month on month, below expectations. Against this backdrop, expectations for an early additional rate hike by the Federal Reserve receded. US long-term yields subsequently fell to the 5.15% range at one point alongside declines in crude oil futures, while USD/JPY plunged to 156.95 yen.
After the selling ran its course, the US 10-year Treasury yield rebounded sharply to the 5.29% range. Remarks from the Dallas and Chicago Federal Reserve Banks rekindled upward pressure on the dollar, and USD/JPY rebounded sharply to 157.91 yen and closed.
During Asian trading hours today, the market is expected to remain firm, but concerns about intervention by Japanese authorities are likely to weigh on moves above the 158 yen level, making the upside feel heavy. With market participation limited at certain times, trading is likely to remain range-bound.
The main focus during New York hours will be the US ISM non-manufacturing index, scheduled for release at 23:00, with a market forecast of 55.0. If the strength of the services sector and the persistence of inflationary pressure are confirmed, USD/JPY could test the 158 yen range through a rise in US long-term yields. If the result falls short of expectations, however, there is a risk of a retreat toward the lower half of the 157 yen range.