USD/JPY: Gains Limited Below 157.00 as Risk Aversion Persists

USD/JPY paused its advance near the 157.00 mark during Thursday’s Asian session, as a renewed bout of risk aversion revived safe-haven demand for the Japanese yen.

That said, the yen remains on fragile footing amid ongoing concerns over Japan’s fiscal position under Prime Minister Sanae Takaichi’s expansionary spending agenda, helping to limit downside pressure on the pair.

Looking ahead, the U.S. JOLTS Job Openings report could provide fresh impetus for near-term trading.

USD/JPY Technical Analysis

The Japanese yen emerged as the weakest-performing G8 currency on Wednesday. Its sharp underperformance has lifted USD/JPY above the 156.80 level at the time of writing, putting the pair on course for a roughly 3% rebound from last week’s lows.

Fundamental Analysis

Investors are offloading the yen broadly ahead of this weekend’s snap election. Rising support for Prime Minister Takaichi has fuelled concerns that a stronger electoral mandate would allow her to extend tax cuts and expand stimulus spending, heightening fears of fiscal strain.

Markets Brush Aside Intervention Concerns

Tokyo authorities have warned of possible intervention to curb excessive yen volatility, but those concerns have been largely brushed aside. Comments from Prime Minister Takaichi highlighting the benefits of a weaker yen, along with the U.S. Treasury Secretary’s denial of any coordinated effort to stabilise the currency, have instead driven the yen sharply lower across the board.

The U.S. dollar, however, is not especially strong on Wednesday. While markets continue to react positively to the nomination of Kevin Warsh as the next Federal Reserve Chair and to the end of the brief partial government shutdown, the recent rally in the U.S. Dollar Index appears to be losing momentum.

Attention now turns to upcoming U.S. data, including the Services PMI and the ADP Employment Change report. The latter could be particularly influential, as the government shutdown has delayed Friday’s official nonfarm payrolls release, leaving private-sector jobs data as a key guide for markets.

Sources: Fxstreet