Japanese Yen steadies as intervention risks rise, Fed hike bets ease

USD/JPY holds its position after experiencing volatility, trading around 161.10 during the Asian hours on Friday. The pair may depreciate as the Japanese Yen (JPY) could strengthen on rising speculation that Japanese officials are preparing another round of currency intervention.

Japan’s Finance Minister Satsuki Katayama reiterated readiness to intervene anytime, noting close forex coordination with the United States (US). Traders view thin liquidity over the US holiday weekend as ideal for official action.

The upside of the USD/JPY pair could be restrained as the US Dollar (USD) loses ground amid a disappointing set of domestic labor data released on Thursday, easing Fed rate hike bets. CME FedWatch tool indicates that financial markets are now pricing in a 52% chance of a September interest rate hike, down sharply from the 66% priced in right before the release.

Recent remarks from Federal Reserve Chair Kevin Warsh at the ECB's Sintra conference firmly reaffirmed the central bank’s independent commitment to a 2% price stability target; he also acknowledged that inflation risks and expectations have begun to moderate over the past month.

US labor market forces Wall Street to aggressively rethink its interest rate outlook. The primary catalyst for this shift was the June Nonfarm Payrolls (NFP) report released on Thursday. The US economy added just 57,000 jobs last month, completely missing the market consensus of 110,000. While the headline unemployment rate managed an unexpected tick downward to 4.2% from May's 4.3%, the severe hiring slowdown heavily signals a cooling broader economy.