Forex Today: Japanese Yen extends rally, markets await US data
Here is what you need to know on Thursday, September 3:
The Japanese Yen (JPY) continues to gather strength against its major rivals in the European session on Thursday, building on Wednesday's impressive rally. In the second half of the day, the US economic calendar will feature weekly Initial Jobless Claims data and the Institute for Supply Management's (ISM) Services Purchasing Managers' Index (PMI) report for August.
Japanese Yen Price This week
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.17% | 0.25% | -1.99% | -0.67% | -0.28% | 1.02% | 0.12% | |
| EUR | 0.17% | 0.43% | -1.80% | -0.52% | -0.12% | 1.14% | 0.30% | |
| GBP | -0.25% | -0.43% | -2.31% | -0.94% | -0.54% | 0.71% | -0.21% | |
| JPY | 1.99% | 1.80% | 2.31% | 1.24% | 1.71% | 2.93% | 2.02% | |
| CAD | 0.67% | 0.52% | 0.94% | -1.24% | 0.40% | 1.68% | 0.74% | |
| AUD | 0.28% | 0.12% | 0.54% | -1.71% | -0.40% | 1.26% | 0.34% | |
| NZD | -1.02% | -1.14% | -0.71% | -2.93% | -1.68% | -1.26% | -0.91% | |
| CHF | -0.12% | -0.30% | 0.21% | -2.02% | -0.74% | -0.34% | 0.91% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
USD/JPY declined sharply during the American trading hours on Wednesday and lost about 1% in a less than 30 minutes. Although this action in markets resembled a possible currency intervention, there was no official confirmation from either the Japanese or the US side. The pair remains under persistent bearish pressure and trades at its lowest level in a month below 157.00 in the European morning on Thursday, losing more than 1% on the day. Reflecting the broad JPY strength, EUR/JPY is down 1% on the day near 182.00, while GBP/JPY also loses slightly more than 1% at around 212.00.
Yen resilience tests USD/JPY longs as Japan data backs BoJ tightening case
Analysts at ING argue that both US and Japanese officials are likely content with the latest moves in the currency market, noting that "US and Japanese authorities must be satisfied by yesterday’s price action and keen to encourage a sense of urgency for those long USD/JPY and EUR/JPY above 160 and 186, respectively." Even so, ING cautions that policy dynamics still favour the Dollar in the near term, with "a Fed hike in mid-September" seen as likely to "keep USD/JPY relatively bid this month," and that "any sustainable turn lower in USD/JPY now probably requires a much more hawkish Bank of Japan and some new initiatives to encourage domestic investment in Japan."
Adding to the case for tighter policy, Deutsche Bank highlights that "Japan's services sector expanded at its fastest pace in five months in August, adding to evidence of resilient domestic activity and potentially strengthening the case for further Bank of Japan (BoJ) policy tightening." Together, the stronger data backdrop and official tolerance for recent price action underscore the growing pressure on Yen bears, particularly those positioned in extended USD/JPY and EUR/JPY longs.
Meanwhile, US President Donald Trump said on Wednesday that the renewed campaign against Iran “won’t continue for too long," adding that he is prepared to launch another attack on Iran. During remarks at the White House, he said that Iran was trying to build a rocket that drops sea mines and was trying to rebuild radar and missile systems. The barrel of West Texas Intermediate (WTI) holds steady at around $88.50 after closing virtually unchanged on Wednesday.
The US Dollar (USD) Index continues to edge lower and fluctuates below 99.50 after closing marginally lower on Wednesday.
US Dollar narrative steadies as ING eyes ISM services and back-end yield risks
Strategists at ING note that the latest US data have done little to shift the broader policy narrative, with “ADP payrolls came in at 38k, leaving few marks.” They point out that market conviction on a September Fed hike “decreased slightly yesterday, with pricing declining from 18bp to 15bp,” adding that this modest pullback was “likely due to the oil rally stalling” rather than any meaningful reassessment of the economic outlook.
Looking ahead, ING highlights that “today, the ISM services report is in focus, and expected to flatten at 54.1,” and argues that “the bar to drive the Fed away from a September hike looks fairly high, especially for second-tier data.” At the same time, they caution that “the main risk remains that higher back-end yields can prompt more interventionism by the Treasury and a revamp of the debasement trade,” underscoring that curve dynamics and policy responses at the long end remain a key source of uncertainty for the Dollar.
EUR/USD clings to small recovery gains and trades at around 1.1600 in the European session on Thursday.
GBP/USD stabilizes near 1.3500 after posting moderate losses for two consecutive days.
Gold (XAU/USD) gathered strength in the American session on Wednesday and rose more than 1% on the day. XAU/USD preserves its bullish momentum and was last seen trading near $4,440, rising about 1.2% on the day.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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