As expectations grow that the divergence in the monetary policy outlook between Japan and the US will continue to put pressure on the yen, market attention is focused on today’s US employment report. Dollar-yen is trading in the lower ¥156 range.
The divergence in the outlook for monetary policy in Japan and the US has been cited as one factor behind the yen’s appreciation this week. The Bank of Japan is pricing in a rate hike in September against the backdrop of rate-hike pressure from US Treasury Secretary Bessent (ベッセント) and comments by BOJ Policy Board member Takata (高田) suggesting a 0.5% rate hike. Expectations for successive rate hikes before year-end are also strengthening. Meanwhile, following comments by FOMC Governor Waller, expectations that US monetary policy will remain unchanged have increased at times, and the divergence in the policy outlook is affecting the market as a source of upward pressure on the yen.
Based on recent FOMC-related comments and inflation data, the market sees the possibility that the monetary policy outlook could change depending on the August inflation data due next week. CME FedWatch pricing for no change and a rate hike is virtually even, and market attention is focused on the change in circumstances following the latest hawkish comments.
In overseas markets from here, the US employment report is expected to serve as an important starting point, with nonfarm payrolls forecast to recover from the previous result. The unemployment rate is expected to be around 4.1%, the labor force participation rate around 61.5%, and average hourly earnings are forecast to rise 0.3% month on month and 3.1% year on year.
Dollar-yen is currently trading in the lower ¥156 range, while one-week volatility remains elevated. Against a backdrop of rising demand to hedge yen-appreciation risk, market attention is focused on the market’s reaction to the US employment report.