Forex Today: Japanese Yen extends rally, Oil prices climb higher

Here is what you need to know on Tuesday, September 8:

The Japanese Yen (JPY) gathered strength against its major rivals on Monday and extended its rally during the Asian trading hours on Tuesday, reaching its highest level against the US Dollar (USD) since mid-February. The economic calendar will not feature any high-impact macroeconomic data releases. Later in the day, Bank of England (BoE) Governor Andrew Bailey and other members of the Monetary Policy Committee (MPC) will testify before the UK Treasury Select Committee on July's Monetary Policy Report.

Markets continue to price in an aggressive Bank of Japan (BoJ) policy-tightening cycle, boosting the JPY. At the time of press, USD/JPY was trading below 154.00, EUR/JPY was fluctuating near 178.75 and GBP/JPY was edging lower toward 208.00, with all three losing more than 1% so far this week.

Yen support builds as Japan wage surge bolsters BoJ hike case

Analysts at Deutsche Bank highlight that the recent Yen strength has “likely been helped by Japan’s real wages increasing by +2.4% year-on-year in July, exceeding expectations of +1.8% and marking the strongest growth since May 2021.” They add that “total cash earnings rose +4.7%, the largest increase since January 1997, accelerating from a revised +4.0% increase in June.” According to the bank, this “stronger-than-expected wage data reinforces the overwhelming case for the Bank of Japan (BoJ) to raise interest rates at next week’s policy meeting, following its previous hike three months ago, and supports the prospect of further monetary policy tightening in the months ahead.”

Crude Oil prices push higher as there are no signs of a de-escalation of the conflict in the Middle East. Secretary of Iran's Supreme National Security Council, Mohsen Rezaei, warned on Tuesday that Tehran would respond to what it calls US "economic warfare" by imposing a maritime exclusion zone across the Persian Gulf. Meanwhile, citing Kpler data, Al Jazeera reported that "an average of 10 commodity ships transited the strait per day over the past 10 days, marking the lowest level since May following US and Iranian strikes on tankers." After rising more than 1.5% on Monday, the barrel of West Texas Intermediate (WTI) is up about 1.4% so far Tuesday, trading above $92.

Gold (XAU/USD) continues to fluctuate in a relatively narrow range at around $4,400 after closing virtually unchanged on Monday.

AUD/USD stays in a consolidation phase above 0.7200 after closing the fourth consecutive trading day in positive territory on Monday. Earlier in the day, the data from Australia showed that the Westpac Consumer Confidence Index declined to -5.2% in September from 6% in August.

EUR/USD edges slightly lower after posting marginal gains on Monday but manages to hold above 1.1600 in the European morning on Tuesday.

GBP/USD struggles to gather recovery momentum after rising 0.2% on Monday and stays below 1.3550.

Sterling steadies as UK fiscal message aims to reassure markets

According to strategists at ING, Sterling "enjoyed a decent session yesterday," with some marginal support likely stemming from Chancellor John Healey’s first major speech. ING notes that Healey delivered "a firm message on fiscal discipline," which helped keep the rise in long-end gilt yields "broadly in line with the wider global bond sell-off." The bank adds that this stance is "likely intended to reassure markets ahead of what could be a steady flow of headlines about the October budget in the weeks ahead."

(This story was corrected at 07:41 GMT to note in the introduction that this article is for Tuesday, September 8, not Monday.)