USD to JPY Exchange Rate Drops Nearly 3 Yen to 146.62 Yen... Plummets Due to US Employment Deterioration

The USD/JPY exchange rate fell to 146 yen. A month ago, it surpassed the 160 yen level, showing a 'super yen depreciation' phenomenon, but after the Bank of Japan (BOJ) raised the benchmark interest rate to 0.25% on the 31st, and with growing concerns about a U.S. economic recession leading to expectations that the Federal Reserve (Fed) will significantly cut interest rates, the USD/JPY exchange rate dropped sharply.

According to Reuters and others on the 2nd (local time), the USD/JPY exchange rate closed at 146.62 yen in the New York foreign exchange market, down 1.84% from the previous day. It plunged nearly 3 yen from the 149 yen level the day before (yen value increased). In the European foreign exchange market, it closed at 148.86 yen, then fell further in the New York market. This is the lowest level since May 11.

Concerns about a U.S. economic recession triggered a weaker dollar. According to the U.S. Department of Labor, the unemployment rate in July was 4.3%, exceeding both market expectations and the previous month's 4.1%. This is the highest level since October 2021. Nonfarm payrolls in July increased by only 114,000, far below the market expectation of 176,000. The June figure was an increase of 179,000.

Due to recession concerns, expectations are growing that the Federal Reserve (Fed) will accelerate the pace of interest rate cuts. According to the Chicago Mercantile Exchange (CME) FedWatch tool, after the July employment report, the federal funds futures market reflected a 71.5% probability that the Fed will cut the benchmark interest rate by 50 basis points (1bp=0.01 percentage points) in September. The probability of a total 125bp cut by December also surged to 45.9%.

As major countries' stock indices plunged and geopolitical crises spread, the Swiss franc, considered a safe-haven asset along with the yen, also surged in value. The USD/CHF exchange rate fell 1.58% from the previous day to 0.859 Swiss francs. This is the lowest level since February 2.

The EUR/USD exchange rate also rose 1.12% (dollar value declined) to close at 1.0912 dollars. During the session, it rose to 1.0927 dollars, the highest since July 18. The GBP/USD exchange rate also increased 0.53% to 1.2807 dollars. It rebounded after hitting a one-month low following the Bank of England (BOE)'s interest rate cut the previous day.