The Japanese Yen gave back its initial post-NFP gains on Friday, with USD/JPY trading around 157.65, down 0.28% on the day. The pair briefly dropped to 156.95 following the release of the US Nonfarm Payrolls (NFP) report but quickly rebounded, erasing the move and returning to pre-release levels. This recovery was attributed to renewed weakness in the Japanese Yen, even as the US Dollar Index (DXY) remained near its daily lows, falling 0.23% after the data release [1].
The US Bureau of Labor Statistics reported that NFP increased by only 29,000 in September, significantly below market expectations of 90,000. Previous months' figures were also revised lower: August's increase was downgraded to 133,000 from 162,000, and July now shows a decline of 10,000 jobs compared to a previously estimated gain of 21,000. The unemployment rate rose to 4.2%, and the labor force participation rate increased to 61.8% from 61.6%. Average hourly earnings rose 3% year-over-year, below the expected 3.2%, easing concerns about wage-driven inflation [1].
Market expectations for Federal Reserve policy shifted following the data. According to the CME FedWatch tool, the probability of an interest rate hike in October dropped to around 18%, down from 24% before the NFP release and 64% a week earlier. Despite this, markets still assign a 69% chance to a rate hike in December. The adjustment in expectations follows a series of weaker US economic releases, including softer-than-expected PCE inflation data on Thursday [1].
On the Japanese side, the Tokyo Consumer Price Index (CPI) excluding fresh food accelerated to 2.7% year-over-year in September from 1.8% in August, surpassing the 2.4% expected. Inflation excluding food and energy also rose to 3% from 2%. These figures strengthen the case for further monetary tightening by the Bank of Japan (BoJ) [1].
CONCLUSION
Despite weak US jobs data and a softer US Dollar, USD/JPY rebounded due to renewed Yen weakness. Lower-than-expected US employment figures reduced the likelihood of an imminent Fed rate hike, while rising Japanese inflation may support future BoJ tightening. Market sentiment remains cautious as investors weigh diverging monetary policy signals.