The Japanese Yen (JPY) strengthened against the US Dollar (USD) on Monday, with USD/JPY extending losses for a second consecutive day. The pair trades near 148.60, down about 0.60% on the day, retracing much of last week’s gains.
US Dollar under pressure amid shutdown concerns
The Greenback’s weakness comes as investors grow cautious ahead of a potential US government shutdown, with the October 1 funding deadline just days away. Political leaders are meeting at the White House on Monday for last-minute negotiations, following a call by President Trump to strike a deal and avoid a lapse in government funding.
The White House indicated that the President is giving Democrats “one last chance to be reasonable” on a short-term continuing resolution. House Minority Leader Hakeem Jeffries signaled Democrats are open to compromise but will not accept cuts to healthcare programs. Republicans argue the Senate must act on the stopgap bill already passed by the House.
Market implications and Fed outlook
Market sentiment has turned cautious amid concerns that a prolonged shutdown could weigh on growth and push the Federal Reserve (Fed) toward a more accommodative stance. Last week’s US Personal Consumption Expenditures (PCE) inflation report came broadly as expected, reassuring investors that price pressures are not re-accelerating.
Attention now shifts to Friday’s Nonfarm Payrolls (NFP) report, with investors focused on labor-market conditions. A weak print could reinforce the view that employment remains the main downside risk to the economy and support expectations for further Fed easing.
Yen gains support from BoJ signals
Adding to the Yen’s strength, Bank of Japan (BoJ) board member Asahi Noguchi—typically viewed as dovish—said on Monday that the need for a rate hike is “increasing more than ever” as Japan approaches its 2% inflation target. Rising wages and firms passing on higher costs signal upside price pressures, though global headwinds, including US tariffs, continue to require caution.
