Ella 
The USD/JPY currency pair remained on the defensive in early Asian trading Thursday. USD/JPY is currently trading around 144.80, down 0.03% on the day. The dollar was lower as U.S. Treasury yields retreated from multi-year highs and fell below 4.20%.
Japan’s industrial activity shrank for a third straight month in August on Wednesday. Japan’s manufacturing purchasing managers’ index (PMI) rose to 49.7 in August from 49.6, preliminary data from Nikkei Bank showed. This result was lower than the expected 49.5. Over the same period, the services PMI rose to 54.3 from 53.8. However, S&P Purchasing Managers’ Index (PMI) data from the US, UK and Eurozone fell for the first time, fueling recession fears and boosting demand for the traditional safe-haven yen.
The dollar (USD) was lower after data showed U.S. business activity expanded at a slow pace in August. That said, the flash S&P Global Composite Purchasing Managers Index fell to 50.4, down from the previous reading of 52.0 and the expected reading of 52.0. This is the largest drop since November 2022. The S&P global manufacturing PMI fell to 47 from 49 in the previous month, and the services PMI fell to 51 from 52.4 in the previous month. Meanwhile, U.S. new home sales hit an annual rate of 714,000, beating expectations by a wide margin of 705,000.
Earlier this week, Richmond Federal Reserve Bank (Fed) President Thomas Barkin said monetary policy would need to be tightened if inflation continued to rise. Market participants will get their clues about the Fed’s interest rate outlook from Thursday’s Jackson Hole seminar. Hawkish comments from central bank policymakers could limit the yen’s upside and support USD/JPY. That said, the monetary policy gap between the U.S. and Japan is the main driver of yen weakness.
Looking ahead, Thursday will see U.S. weekly jobless claims and durable goods orders. The Jackson Hole Symposium will be an event closely watched by traders. On Friday, the focus will shift to a speech by Federal Reserve Chairman Jerome Powell. These events are crucial to clarify USD/JPY volatility.
