Yen Pulls Back from Record Lows as US Jobs Data Cools Rate Hike Fears

Tokyo : Japanese currency yen pulled back from record lows and was trading at 161.2 levels on Friday. The currency had touched a record low of 162.8 on Tuesday as hopes of the US Federal Reserve raising rates gained steam on the back of high inflation. The pullback in the Japanese currency has come as those fears take a back seat now that the latest US jobs data has come in weaker than expected. The US economy added 57,000 jobs for the month of June, data from the Bureau of Labor Statistics showed. The unemployment rate has, however, ticked lower at 4.2 per cent due to a massive drop in the labour participation numbers. The Japanese Finance Minister Satsuki Katayama, in a press conference, reiterated the government’s stance that it is ready to act at an appropriate moment to stabilise the currency, according to Reuters. Japan spent more than USD 73 billion from April through May to stabilise the currency and arrest volatility. In Japan, the central bank intervenes in the foreign exchange market at the direction of the Ministry of Finance. The foreign exchange intervention is conducted by the monetary authorities to stabilise the currency by buying and selling currencies. Japan uses the Foreign Exchange Fund Special Account (FEFSA) to buy and sell currencies like the yen and the US dollar at the time of sharp fluctuations in exchange rates.High inflation figures in the US that have remained above the comfort level of the US Federal Reserve and the higher pump prices of gasoline, despite a drop in crude oil prices, have prompted many to raise the odds of a rate hike. But the weak jobs report on Thursday has cooled off those fears even as the newly appointed Fed chair, Kevin Warsh, reiterated that bringing inflation down is a priority. Oil prices fell after the US and the Iranian regime arrived at an interim peace agreement and have started talks for a more durable peace deal.The yen carry trade has seen investors borrowing in the Japanese currency at lower rates and investing in high-yielding assets abroad. In 2024, the interest rate hike by Japan, which has traditionally see near-zero rates, suddenly rocked the carry-trade market and led to its unwinding, bringing down stocks in US. Investors fear that an intervention by the Ministry of Finance along with another round of rate hikes by Bank of Japan could unravel the yen carry-trade and lead to losses. Also read : Food inflation projected to average 6% in FY27 amid rainfall deficit concerns (ANI)