September 01, 2022 12:01 AM ET
By: AnalysisWatch
The USD/JPY pair is up 0.45% intraday near 139.60 on Thursday morning in Europe, marking the fifth consecutive day it has been on offer. The recent rise in the yen pair could be attributed to rising U.S. Treasury yields as well as hawkish bets on upcoming U.S. Federal Reserve (Fed) actions. The quote also remains firmer due to risk-on moods supporting safe-haven demand for the U.S. dollar.
However, 10-year U.S. Treasury yields rose to a two-month high of around 3.21 percent, while two-year bond coupons rose to their highest levels since 2007, near 3.51 percent at the latest.The intraday drop of 0.56% in S&P 500 futures to their lowest levels since late July, at 3,930 at press time, also reflects this negative sentiment.
In addition, the CME FedWatch tool shows a 74.0% probability of a 75-basis point Fed rate hike in September, up from 73.0% the previous day.
The Fed's hawkish bets seem to be ignoring the weaker US data, with the ADP Employment Change rising 132K, compared to 288K expected and 270K previously. The reason could be related to August's average wage increases, which rose 7.6% y/y, keeping Fed policymakers hawkish. After the data, Federal Reserve Bank of Cleveland President Loretta Mester said on Tuesday that she did not expect the Fed to cut rates next year, as Reuters reports. In addition, newly appointed Dallas Fed President Lory Logan joined the ranks of other hawkish U.S. central bankers by saying, "Restoring price stability is the number one priority."
In Japan, the Jibun Bank manufacturing PMI for August, at 51.5 versus the initial 51.0 forecast, appears to be getting all the attention. It is also likely that comments from the Japanese Ministry of Finance that "the Japanese government is monitoring currency movements with a 'high sense of urgency' as rapid movements in exchange rates are undesirable" have been ignored.
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