Japanese Yen softens despite fresh currency intervention threats

The USD/JPY pair trades in positive territory around 160.20 during the Asian trading hours on Tuesday. Escalation in the Middle East continues to boost the US Dollar (USD) against the Japanese Yen (JPY). However, fears of imminent currency intervention by Japanese authorities might cap the upside for the pair. 

The US economy posted a third straight month of strong job gains in May, with the US Nonfarm Payrolls (NFP) rising by 172K in May, versus the 179K increase (revised from 115K). This figure came in stronger than the market expectation of 85K. Meanwhile, the Unemployment Rate remained unchanged at 4.3% in May, in line with the market consensus.

Traders raise their bets on the US Federal Reserve (Fed) rate hike after the upbeat US jobs data, supporting the Greenback. Markets are now pricing in a 43% chance of a quarter-point rate hike in December, up from just about 14% a month ago, according to the CME FedWatch tool.

Japanese authorities have issued strong verbal warnings, stating that the government is fully prepared to take decisive and appropriate action to protect the domestic currency. This, in turn, could underpin the JPY and create a headwind for the pair. Japan’s Finance Minister Satsuki Katayama on Tuesday emphasized that the stance is unchanged and authorities are prepared for decisive measures.