The dollar softened overnight as the yen strengthened, with USD\/JPY moving from 162.83 to a low of 160.64 before trading at 161.28. The shift followed weaker-than-expected US non-farm payrolls: payrolls rose by 57k versus consensus expectations for a 113k gain, alongside downward revisions to prior months. The data reduced the chance of a near-term Fed rate rise, while leaving the broader labour market picture and the inflation trajectory unresolved.<\/p>\n
Attention also turned to possible foreign-exchange intervention by Japanese authorities, after price action suggested the Ministry of Finance may have sold dollars to limit yen weakness, though there was no official confirmation. Reuters reported officials may stop signalling intentions in advance, contrasting with the 30 April intervention that followed ample warnings. With key US holidays approaching and liquidity expected to thin, markets remained focused on further intervention risk as well as on upcoming CPI and PCE releases and the outlook from the FOMC.<\/p>\n—\n
The Dollar has weakened significantly following the very soft June 2026 Non-Farm Payrolls report, which added only 57,000 jobs against expectations of 113,000. This, combined with suspected intervention from Japanese officials, has pushed USD\/JPY sharply down from above 162. We see this as a clear signal that the pair’s upward momentum has been broken for now.<\/p>\n
While this weak jobs number takes a near-term Fed rate hike off the table, it doesn’t guarantee future cuts because inflation remains the primary concern. With the latest Core PCE for May 2026 holding firm at 2.8%, we believe the Federal Reserve will wait for more inflation data before signaling any policy pivot. This creates a confusing picture where bad economic news isn’t necessarily good news for markets.<\/p>\n—\n
We must remain extremely alert to the risk of further intervention, which now seems to be happening without the prior warnings we saw in 2024. This change in tactics from the Ministry of Finance is designed to create uncertainty and punish speculators during periods of low liquidity, like the upcoming US holiday. We saw similar unconfirmed moves in late April and early May of 2024, which were later revealed to be part of a record \u00a59.79 trillion support package.<\/p>\n
In response, we are adjusting our strategies to hedge against further downside in USD\/JPY over the coming weeks. This involves buying put options to protect existing long positions or to speculate on a continued move lower towards the 160 level. The spike in one-month implied volatility suggests the options market is pricing in more sharp moves, making these hedges more expensive but necessary.<\/p>\n
With the US Independence Day holiday approaching, market liquidity will be very thin, magnifying any potential moves from official intervention. We believe the immediate goal is to flush out the heavy speculative long positions that have built up. Therefore, we would be very cautious about initiating new long USD\/JPY positions until this period of heightened risk passes.<\/p>\n\n\n\n