Japanese Yen remains subdued as strong US figures boost USD/JPY

USD/JPY Rises as US Dollar Gains Momentum

On Thursday, the Japanese Yen (JPY) lost some of its earlier strength against the US Dollar (USD), as the Greenback advanced broadly in response to fresh US economic data. At present, the USD/JPY pair is hovering near 157.00, marking its third straight day of gains.

US Labor Market Remains Robust

According to figures from the US Department of Labor, initial applications for unemployment benefits edged up to 208,000 for the week ending January 3. This figure was slightly below the anticipated 210,000 and higher than the previous week’s revised total of 200,000.

Meanwhile, continuing jobless claims increased to 1.914 million from 1.858 million. The four-week average for initial claims dropped to 211,750 from 219,000, highlighting ongoing resilience in the US job market.

Trade Balance Surprises to the Upside

The US Dollar also benefited from a significant improvement in the nation’s trade balance. Data from the Bureau of Economic Analysis and the US Census Bureau revealed that the trade deficit in goods and services narrowed to $29.4 billion in October, far better than the expected $58.9 billion and a notable improvement from September’s revised gap of $48.1 billion.

This marks the smallest trade deficit since June 2009, driven by imports dropping to their lowest level in 21 months and exports reaching a new record, amid ongoing tariff-related fluctuations.

Dollar Index and Interest Rate Outlook

The US Dollar Index (DXY), which measures the Greenback against six major currencies, is trading near 98.80—close to its highest point in a month—supported by rising US Treasury yields.

Overall, the latest US economic indicators have helped alleviate worries about a potential slowdown in employment, reinforcing expectations that the Federal Reserve will maintain its current policy stance. According to the CME FedWatch Tool, markets are pricing in an 88% chance that interest rates will remain unchanged at the January 27-28 meeting.

Nevertheless, investors still anticipate two rate cuts later in the year, with Friday’s Nonfarm Payrolls (NFP) report expected to play a key role in shaping short-term market sentiment.

Yen Pressured by Geopolitical and Domestic Factors

In Japan, the Yen is under slight pressure due to rising tensions with China. Recently, Beijing has implemented export restrictions on certain “dual-use” goods to Japan, citing security concerns, and has initiated an anti-dumping probe into Japanese dichlorosilane—a chemical vital for semiconductor manufacturing.

On the economic front, Japan’s wage growth remained subdued in November, with labor cash earnings increasing by just 0.5% year-over-year. This result fell short of the expected 2.3% and was a sharp decline from the previous 2.6% growth rate.