US-Iran deal hopes fail to prevent Yen losses against the Dollar

158.00 marks USD/JPY's highest level since 29 October. The pair remains close to that peak.
An above-forecast ISM manufacturing reading helps USD/JPY recover from its low.
Following September wage figures on Thursday, BoJ Governor Ueda addresses the IMF on Friday.

158.00 marked USD/JPY's highest level since 29 October. US-Iran diplomacy weakened the Dollar against the Euro and the Pound, but not against the Yen. As the Dollar's losses elsewhere reached their deepest point, the pair briefly retreated to just above 157.50 before advancing to the high. It now trades just below 158.00.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Lower Crude Oil prices following the US-Iran talks reduce Japan's import costs, as the country sources almost all of its oil overseas. Even so, the Yen lost ground. With the Bank of Japan (BoJ) not due to make its next policy decision until 17-18 December, no change on the Japanese side of USD/JPY's interest-rate differential is scheduled for more than six weeks.

S&P Global's final US manufacturing index declined from 56.0 to 54.9, with USD/JPY retreating to just above 157.50. The subsequent Institute for Supply Management (ISM) manufacturing survey climbed to 55.5, beating the 54.6 forecast. The pair then recovered to just below 158.00.

3.8% Wage Growth Forecast; BoJ and US Data Ahead

At 23:50 GMT on Wednesday, the BoJ releases its meeting minutes. September wage figures are due at 23:30 GMT on Thursday, with annual growth forecast to hold at 3.8% for a second month. At 16:00 GMT on Friday, BoJ Governor Ueda delivers a lecture at the International Monetary Fund (IMF). All three will inform the BoJ's December decision.

A reading of 54.8, down from 54.9, is forecast for Wednesday's ISM services index, scheduled for 15:00 GMT. Friday brings the October payrolls report at 13:30 GMT, with 65K expected after 29K. Both releases bear on USD/JPY's interest-rate differential, following the Fed's decision to leave rates at 3.75%-4.00% on 28 October.

156.00-159.00 Range Frames USD/JPY Trading

After recovering from a September trough just below 153.00, USD/JPY has traded from just above 156.00 to near 159.00 since late September. Within that band, the 50-day and 200-day Exponential Moving Averages (EMA) sit less than a fifth of a yen apart. Repeated crossings of both averages have characterised trading since early October.

5-Minute Chart: USD/JPY

Daily Chart: USD/JPY

Japanese Yen: Frequently Asked Questions

Which Factors Shape the Japanese Yen's Value?

Among the world's most actively traded currencies, the Japanese Yen (JPY) draws its value broadly from Japan's economic performance. More specific influences include Bank of Japan policy, the gap between Japanese and US bond yields, and traders' appetite for risk, alongside other factors.

How Does Bank of Japan Policy Affect the Yen?

Currency control forms part of the Bank of Japan's mandate, making its actions important for the Yen. Direct intervention in foreign exchange markets has occasionally been used, typically to weaken the currency. Political concerns among Japan's main trading partners, however, discourage frequent intervention. Between 2013 and 2024, the BoJ's ultra-loose monetary policy drove Yen depreciation against major currency peers as its policy increasingly diverged from that of other leading central banks. More recently, a gradual withdrawal of this ultra-loose policy has provided some support for the Yen.

What Does the US-Japan Bond Yield Gap Mean for the Yen?

By maintaining ultra-loose monetary policy over the last decade, the BoJ widened its policy divergence with other central banks, especially the US Federal Reserve. That divergence helped widen the yield gap between 10-year US and Japanese bonds, favouring the US Dollar over the Japanese Yen. The gap is now narrowing as the BoJ implements its 2024 decision to move gradually away from ultra-loose policy and other major central banks cut interest rates.

Why Does Risk Sentiment Matter for the Japanese Yen?

Often regarded as a safe-haven investment, the Japanese Yen tends to attract investors during periods of market stress because of its perceived reliability and stability. In turbulent markets, the currency is therefore likely to appreciate against currencies considered riskier investments.