Yen Advances as BoJ Signals Counter Strong US Jobs Data

Key Moments

Yen Firms as BoJ Signals Willingness to Tighten

The USD/JPY pair traded weaker near 158.25 during Monday’s early Asian session, with the Japanese Yen gaining ground against the U.S. Dollar. The move followed Bank of Japan (BoJ) meeting minutes indicating that policymakers are prepared to step up monetary tightening if needed.

At its most recent policy gathering, the BoJ left interest rates unchanged but underscored its commitment to addressing inflation risks, which supported market expectations for a potential rate increase in December. The minutes from the September meeting, released on Thursday, showed that most policymakers viewed further interest rate hikes as appropriate as underlying inflation moved closer to the central bank’s 2% objective.

On Friday, former BoJ chief economist Seisaku Kameda added to this narrative, stating that the central bank is expected to lift interest rates in December and continue raising borrowing costs next year until they reach 2% in response to intensifying inflation pressures.

Robust U.S. Labor Data Strengthens Case for Fed Hike

U.S. Nonfarm Payrolls (NFP) increased by 165,000 in October, according to data from the U.S. Bureau of Labor Statistics (BLS) released on Friday. This compared with 60,000 in September and exceeded expectations for a 65,000 increase. The Unemployment Rate edged down to 4.1% in October from 4.2% in September.

The stronger-than-anticipated jobs report reinforced expectations that the Federal Reserve remains on course to raise interest rates in December. “The labor market is heating up across-the-board and supports our view that the Fed will raise the policy rate again in December,” said Kathy Bostjancic, chief economist at Nationwide.

Pricing in interest rate futures reflected this shift, with financial markets assigning roughly a 79.6% probability of a rate hike at the Fed’s meeting next month, up from 72.8% before the release of the jobs data, according to the CME FedWatch tool.

Haven Demand and BoJ Normalization Support the Yen

Strategists at ABN Amro noted that recent risk-off sentiment in markets favored the Yen over the U.S. Dollar. They observed that the “DXY Index was unchanged at 101.6 despite the equity rout, as falling US yields eroded the greenback’s appeal.” At the same time, the Yen benefited from both safe-haven flows and domestic monetary policy signals.

ABN Amro highlighted that “the JPY appreciated by 0.5% to 157.70 per USD, underpinned by the Bank of Japan minutes, which reinforced expectations of further normalisation.” This combination of haven demand and rising confidence in a shift away from ultra-loose policy helped underpin the Japanese currency despite firm U.S. economic data.

Hawkish Fed Rhetoric Keeps Dollar Bias Intact

Comments from Federal Reserve officials continued to skew hawkish, with particular focus on remarks from Fed’s Daly. Her stance was described as notably more hawkish, reflected in an FXS Speechtracker score of 8/10 compared with a baseline of 6.4/10, emphasizing elevated tightening risks.

Daly indicated that although the labor market data were “good news” and wage growth “isn’t booming,” real wages are declining and inflation has been “high for too long,” identifying inflation as the top priority and backing the case for further policy tightening even in the face of a solid labor backdrop. Her view that a strong labor market provides room for additional action, alongside a readiness to raise rates if required, was seen as supportive of a firmer U.S. Dollar stance while keeping pressure on risk assets.

The FXS Fed Sentiment Index climbed by 0.95 points to 143.10, reinforcing a decisively hawkish tone well above the neutral 100 mark and consistent with the elevated FXS Speechtracker reading. This outcome indicated that, despite references to uncertainty around tariffs, war, and AI, markets still perceived the Fed as leaning toward further tightening, a context that was viewed as supportive of the DOLLAR relative to the EURO and YEN.

USD/JPY Technical Picture: Range-Bound Below the 100-Day SMA

On the daily chart, USD/JPY remains confined in a narrow band just under the 100-day Simple Moving Average (SMA) while trading above the middle line of the Bollinger Bands. This setup points to a largely sideways bias, with the upside restrained by the upper Bollinger Band and the 100-day SMA, even as the 14-day Relative Strength Index (RSI) at 52.93 reflects mildly positive but still non-directional momentum.

On the upside, the first resistance area sits around the upper Bollinger Band at 158.95, followed by the 100-day SMA near 159.05. A daily close above this latter level would be required to re-establish a more decisive bullish move. On the downside, initial support aligns with the middle Bollinger Band around 157.95, with a more substantial floor at the lower band near 156.95. A break below that lower boundary would bring attention to a broader corrective phase in USD/JPY.