Yen. Image Source: Pixabay

The Japanese Yen (JPY) trades under modest pressure against the US Dollar (USD) on Tuesday, with USD/JPY trimming earlier losses as the Greenback holds firm on steady US economic data and cautious Federal Reserve (Fed) rhetoric.

At the time of writing, USD/JPY is trading around 147.80 during American trading hours after briefly dipping to an intraday low of 147.51. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is hovering near 97.38 as traders await remarks from Fed Chair Jerome Powell, scheduled for 16:35 GMT, for fresh monetary policy cues.

Japanese financial markets were closed earlier in the day for the Autumnal Equinox holiday, which limited activity during Asian hours. Trading volumes normalized in the European and US sessions, leaving the pair primarily driven by US Dollar dynamics and Fed signals.

In the US, the S&P Global Composite Purchasing Managers Index (PMI) eased to 53.6 in September, missing forecasts of 54.6 and down from 54.6 in August. The Manufacturing PMI slipped to 52, in line with expectations but down from 53 in August, while the Services PMI came in at 53.9, matching forecasts yet easing from 54.5 a month earlier.

S&P Global’s Chief Business Economist Chris Williamson noted that while tariffs are still driving up input costs in both manufacturing and services, fewer firms are able to raise selling prices to offset them. He said this suggests company margins are being squeezed, but also points to a potential moderation in inflation pressures.

The Greenback also drew support from cautious remarks by Fed officials. Chicago Fed President Austan Goolsbee said that while rates could come down if inflation continues to ease, he is not considering larger 50-basis-point moves, describing current policy as only mildly restrictive.

On the Japanese side, the Bank of Japan (BoJ) kept policy unchanged at its meeting last week, but expectations for an October hike are gradually building. ING now puts the probability of a move at around 52%, as markets brace for the central bank to act sooner rather than later. Attention will also turn to the Jibun Bank flash PMIs due on Wednesday, followed by the BoJ meeting minutes on Thursday, which could offer more clues on the policy outlook.

More By This Author: