Key facts
- USD/JPY approached the 160 yen per dollar level.
- Japanese Finance Minister Satsuki Katayama warned of readiness for decisive action against excessive volatility.
- The yen is heading for its fourth consecutive weekly loss against the dollar.
- Bearish yen positions have reached their largest since July 2024.
- The dollar has strengthened globally, supported by strong U.S. economic data and safe-haven demand.
- Markets await the U.S. nonfarm payrolls report, forecast at 85,000 jobs added in May.
The Japanese yen neared the 160 per dollar level on Friday, prompting official warnings from Japan's Finance Minister Satsuki Katayama, who stated readiness to take decisive action against excessive volatility. The yen was trading at 159.9 per dollar, heading for its fourth straight weekly loss. This development occurs ahead of the U.S. nonfarm payrolls report, with markets showing reluctance to aggressively test the Bank of Japan before the data release. Investors have built the largest bearish yen position since July 2024, valued at nearly $9 billion, with analysts suggesting little incentive to unwind these holdings without a significant shift in Japan's rate outlook or economic growth. The Bank of Japan is expected to raise interest rates this month and potentially again by year-end. The U.S. dollar has been a strong performer globally, rising 0.4% against a basket of major currencies this week and 1.3% over the past month. This strength is attributed to robust U.S. economic data, expectations of Federal Reserve rate hikes, and safe-haven demand amid concerns over higher energy prices impacting importers like the Eurozone, Japan, and China. The U.S. economic surprise index has reached a three-year high, with yields on U.S. 10-year Treasuries rising 50 basis points since the start of the Iran war. Conversely, elevated energy prices continue to drag on European economic activity. The euro was up 0.2% at $1.1638, and the pound rose 0.3% to $1.347. Markets are now awaiting the U.S. nonfarm payrolls report, with forecasts predicting an 85,000 increase in jobs for May and the unemployment rate holding steady at 4.3%.