Japan's manufacturing PMI decline dragged down the yen, while the dollar rebounded, pushing USD/JPY to test the 148 mark.
2025-09-24 13:32:59
The yen continued to fall during the Asian session on Wednesday, pressured by weak manufacturing data, pushing USD/JPY up to 148. The latest Japanese manufacturing PMI for September fell to 48.4, the largest drop in six months, meaning it has been in contraction territory for 14 of the past 15 months.
The result highlights the weakness of Japan's economic recovery and further postpones investors' expectations for the timing of the Bank of Japan (BoJ) interest rate hike.
Despite this, calls for exiting the ultra-loose policy within the Bank of Japan are growing. In last week's interest rate decision, two members voted against keeping the interest rate unchanged, indicating that there is some internal pressure to raise interest rates.
At the same time, the October Liberal Democratic Party leadership election is also seen as a potential uncertainty. If a dovish candidate wins, the tightening process may be delayed. However, the market is still pricing in the possibility of a 25 basis point rate hike in October, which contrasts with the Fed's dovish tone and provides some support for the yen.
Meanwhile, Federal Reserve Chairman Powell reiterated the need to maintain a careful balance between combating inflation and protecting jobs, emphasizing that excessive easing could lead to policy reversals. These comments ended the dollar's two-day decline, attracting some buying and pushing USD/JPY higher.
Market participants are awaiting data such as US new home sales, revised second-quarter GDP, and the core PCE price index for further confirmation of the Fed's policy direction. Meanwhile, Japan's Tokyo CPI data will be released this week, which could impact market expectations for a Bank of Japan rate hike.
From a technical perspective, USD/JPY has been range-bound since early August, with daily indicators remaining neutral and the exchange rate still below its 200-day moving average, suggesting a lack of overall directional momentum. Upside is currently constrained by the 148.00 level. A break above the 148.35-148.55 area could lead to a test of the 149.00-149.15 range.
The support levels below are 147.20 and 147.00, respectively. If they fall below, the price may fall further to 146.20 or even 145.50-145.45. Overall, the exchange rate tends to fluctuate in the short term, and the direction of the breakthrough still needs to be driven by key data.
Editor's opinion:
Weak Japanese manufacturing data is weighing on the yen, but diverging policy expectations and geopolitical risks continue to offer the yen's safe-haven properties. USD/JPY is currently range-bound and, absent new macroeconomic catalysts, is likely to continue consolidating between 147 and 148.50 in the short term. The market's reaction to Tokyo's CPI and US core PCE figures will determine whether the exchange rate can break out of its consolidation pattern.
The result highlights the weakness of Japan's economic recovery and further postpones investors' expectations for the timing of the Bank of Japan (BoJ) interest rate hike.
Despite this, calls for exiting the ultra-loose policy within the Bank of Japan are growing. In last week's interest rate decision, two members voted against keeping the interest rate unchanged, indicating that there is some internal pressure to raise interest rates.
At the same time, the October Liberal Democratic Party leadership election is also seen as a potential uncertainty. If a dovish candidate wins, the tightening process may be delayed. However, the market is still pricing in the possibility of a 25 basis point rate hike in October, which contrasts with the Fed's dovish tone and provides some support for the yen.
Meanwhile, Federal Reserve Chairman Powell reiterated the need to maintain a careful balance between combating inflation and protecting jobs, emphasizing that excessive easing could lead to policy reversals. These comments ended the dollar's two-day decline, attracting some buying and pushing USD/JPY higher.
Market participants are awaiting data such as US new home sales, revised second-quarter GDP, and the core PCE price index for further confirmation of the Fed's policy direction. Meanwhile, Japan's Tokyo CPI data will be released this week, which could impact market expectations for a Bank of Japan rate hike.
From a technical perspective, USD/JPY has been range-bound since early August, with daily indicators remaining neutral and the exchange rate still below its 200-day moving average, suggesting a lack of overall directional momentum. Upside is currently constrained by the 148.00 level. A break above the 148.35-148.55 area could lead to a test of the 149.00-149.15 range.
The support levels below are 147.20 and 147.00, respectively. If they fall below, the price may fall further to 146.20 or even 145.50-145.45. Overall, the exchange rate tends to fluctuate in the short term, and the direction of the breakthrough still needs to be driven by key data.
Editor's opinion:
Weak Japanese manufacturing data is weighing on the yen, but diverging policy expectations and geopolitical risks continue to offer the yen's safe-haven properties. USD/JPY is currently range-bound and, absent new macroeconomic catalysts, is likely to continue consolidating between 147 and 148.50 in the short term. The market's reaction to Tokyo's CPI and US core PCE figures will determine whether the exchange rate can break out of its consolidation pattern.
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