The Japanese yen surged to a seven-month high against the US dollar on Tuesday, pressing toward 152.89 — its strongest level since Jan. 30 — as the dollar index retreated 0.3% to 98.86 following the release of a much stronger-than-anticipated US payrolls report.
Japan’s finance minister, Satsuki Katayama, reaffirmed that authorities remain aligned on addressing abnormal yen weakness, underscoring the ongoing policy coordination that has backed the currency through the summer. Tokyo spent a record 15 trillion yen ($97.18 billion) from July 30 through Aug. 26 in direct intervention to bolster the yen.
The currency’s gains were reinforced by an upward revision to Japan’s second-quarter GDP growth. The economy expanded at an annualized rate of 1.4% in the April-June period, beating preliminary estimates of 1.1%, adding weight to market speculation that the Bank of Japan may move toward further monetary tightening.
Traders pricing in a BoJ rate hike later this month stood at approximately 75%, according to CME FedWatch data. The prospect of a more hawkish stance from the world’s second-largest central bank has been a key driver of the yen’s recovery from its July lows, which followed a historic joint intervention by Washington and Tokyo.
On the US side, the August nonfarm payrolls report showed employers added 162,000 jobs — nearly triple the 55,000 forecast — while the unemployment rate held steady at 4.1%. June and July payrolls were also revised upward by a combined 55,000. Despite the outsized print, the data did little to shift the market’s assessment of Fed policy. Odds of a quarter-point rate hike by the Fed later this month rested at roughly 60%, with traders now looking ahead to this week’s inflation reports as the decisive factor.
JPMorgan analysts led by Michael Feroli wrote that the August employment data was "reasonably good" and would not change the Fed’s calculus. They expect core CPI to rise just 0.21% month over month, a pace low enough to keep the central bank on hold past the September meeting.
The Canadian dollar also posted modest gains, with the USD/CAD pair slipping 0.3% to 1.3779. Retaliatory tariffs targeting $27.6 billion in US imports took effect Tuesday, coinciding with the dollar’s broad retreat. President Donald Trump criticized Bombardier on social media, arguing the company relied heavily on American buyers while Canada restricted US financial firms, adding that any access to the US market required domestic production.
