Resilient US labor data and sticky PCE inflation reduce near-term Fed rate cut expectations, bolstering the Dollar against the Yen.
The USD/JPY pair remains near its 2024 highs, supported by strong US economic data and elevated Treasury yields. Persistent labor market strength and sticky inflation keep Federal Reserve rate cuts off the table for now, reinforcing the Dollar’s carry appeal.
Recent nonfarm payroll improvements and stubbornly high PCE inflation suggest inflation may ease slowly, even as oil prices decline. US 2-year yields above 4% and 10-year yields around 4.4% continue to attract carry trades, underpinning the Dollar’s strength.
While Japanese authorities may consider policy support for the Yen, the Fed’s patient stance and elevated term premia limit downside risks for USD/JPY in the near term.