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Yen gains on US dollar

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The Japanese Yen is set to book one of its best weeks in history against the US Dollar, as a string of (un)confirmed interventions have pushed the USDJPY pair from roughly 160.00 to 153.00 since last Friday.

As the dust settles, the question is, how long will the effect from these interventions linger, and if they can keep USDJPY trading at current levels or lower.

Meanwhile, the DXY US Dollar Index – which gauges the value of the US Dollar against a basket of six foreign currencies – is holding up around 105.00 as markets are stepping away in order not to get steamrolled by the Japanese interventions.

Still, the recent depreciation of the Greenback could offer a window of opportunity for USD buyers to step in and gear up for a profitable ride higher. This upturn could already happen on Friday with the US Jobs Report data for April on the docket.

More broadly, the significant rate differential between the US and Japan isn’t likely to allow this big appreciation of the JPY against the USD to last long.

US nonfarm payrolls (NFP changes are expected to increase by 243,000, lower than the 303,000 rise seen in March.

Monthly Average Hourly Earnings are expected to grow at a stable 0.3%, and the Unemployment Rate is set to remain at 3.8%.

Meanwhile, several Japanese companies have reported to Bloomberg that they are facing substantial issues due to the recent weakness in the Japanese Yen. A boom in tourism is also putting pressure on local inflation.

Japanese markets were closed on Friday for the Greenery Day bank holiday.  Equities are trading in the green with both European indexes and US Futures up near 0.5% on average.

The CME Fedwatch Tool suggests an 85.5% probability that June will still see no change to the Federal Reserve’s fed fund rate. Odds of a rate cut in July are also broadly out of the cards, while for September the tool shows a 60% chance that rates will be lower than current levels.

The benchmark 10-year US Treasury Note were trading around 4.57%, the lowest level this week, while Japanese 10-year JGB are trading at the high for this week near 0.889%.

(Source: OANDA)