- The Japanese Yen (JPY) rose on Friday but could fall on Monday
- Japanese PM resigned
- The US Dollar (USD) fell versus its major peers
- US non farm payrolls rose just 22k vs 75k expected
The US dollar Japanese yen (USD/JPY) exchange rate fell on Friday after gains in the previous session. The pair rose 026% in the previous session, settling on Thursday at 148.49. On Friday at 21:30 UTC, USD/JPY settled 0.73% lower at 147.41 and traded in a range of 146.82 to 148.56. The pair 0.24% rose across the week.
The yen gained on Friday amid a weaker USD due to diverging central bank management policy expectations. However, those games could be short-lived after the Japanese Prime Minister Shigeru Ishiba said he will resign following a second national election setback.
Japan’s long-dated debts will likely fall further, and the yen is also expected to weaken when the markets open on Monday. Lisa’s monetary and fiscal policy could be expected if candidate Takaichi succeeds him as she favours stimulus measures, which would likely see the Bank of Japan take a more cautious view on interest rate hikes.
This latest development brings an increase in political risk and potentially opens a door to a general election being held by the new leader. These moves could lead to an increase in fiscal law spending as taps are turned on to appeal to the electorate.
The US dollar fell across the board on Friday. The US dollar index, which measures the USD against a basket of peers, fell 0.59% on Friday after gains on Thursday.
The USD fell sharply on Friday after weaker-than-expected US non-farm payroll data supported the view that the Federal Reserve will cut interest rates in the meeting this month. Fate a shade that 22,000 jobs were added to the US economy in August, and the revision showed that employment shrank in June for the first time since 2020. Meanwhile, the unemployment rate rose to 4.3% up from 4.2%. The figures have cemented expectations that the Federal Reserve will cut interest rates at meetings on September 16 to 17.
The market is widely expecting a 25 basis point rate cut; however, a larger rate cut of 50% is also a possibility.
This week, attention will be on US inflation data, the final key data point ahead of the FOMC meeting.
