Closing at 149.86 Yen! The Relationship Between USD/JPY and Revised PMI and ISM Manufacturing Index

Dollar/Yen

USD/JPY has seen a consecutive two-day rise, closing at 149.86 Yen, which is about 49 cents higher compared to the previous day.

This ascent is influenced by the Federal Reserve (FRB) in the United States signaling a likelihood of maintaining policy interest rates at high levels for an extended period. Consequently, long-term interest rates in the United States have surged, driving a trend of selling Yen and buying Dollars.

Furthermore, the fact that the revised PMI (Purchasing Managers’ Index) and ISM Manufacturing Index for the U.S. manufacturing sector in September exceeded expectations has also bolstered the USD/JPY exchange rate. It briefly reached 149.87 Yen, marking the highest level since October of the previous year.

However, as it approached the 150 Yen mark, concerns about intervention in the foreign exchange market by the Japanese government and the Bank of Japan remained, which led to a more gradual pace of ascent. Additionally, a drop in stock prices acted as a drag on the forex market.

■ Euro to Dollar (EUR/USD) Movement

EUR/USD declined for the first time in three business days, closing at 1.0477 Dollars, which is approximately 0.0096 Dollars lower compared to the previous day.

The surge in long-term U.S. interest rates, with U.S. 10-year bond yields briefly reaching around 4.7014%—the highest level since October 2007—has generally fueled buying of the Dollar.

Near the end of trading, it briefly hit 1.0477 Dollars, marking the lowest level since December 7th of the previous year. Concerns about a slowdown in the Eurozone economy have prompted selling of the Euro.

■ Euro to Yen (EUR/JPY) Movement

EUR/JPY also declined for the first time in three days, closing at 157.02 Yen.

The main reason behind the drop in EUR/JPY is the decline in EUR/USD, coupled with a flight to safety amid the drop in the Dow Jones Industrial Average, which accelerated the trend of buying Yen and selling Euro.

Other major Yen crosses also traded weakly, with GBP/JPY, AUD/JPY, NZD/JPY, CAD/JPY, ZAR/JPY, and MXN/JPY all registering declines. Cross-currency pairs involving the Yen are particularly sensitive to risk factors and tend to be influenced by economic indicators and the global economic situation.

Dollar movements with respect to other currencies were also closely watched. The Dollar Index briefly reached 107.03, marking the highest level since November of the previous year.

This suggests that the Dollar is strong relative to major currencies. GBP/USD fell, while USD/CHF rose.

The Dollar’s strength indicates its relative impact on other currencies, and the high in the Dollar Index is garnering attention in the market.

■ Crude Oil Market and Economic Indicators

Let’s briefly touch upon the crude oil market as well.

NY crude oil futures on the 2nd day continued to decline. This was due to the perception of expensive oil prices amidst the strong Dollar and concerns about weakening demand due to economic sluggishness in China and Europe.

The crude oil market is also sensitive to the strong Dollar and global economic uncertainty.

Finally, let’s discuss the numerical values of economic indicators.

The U.S. ISM Manufacturing Index for September exceeded market expectations, coming in at 49.0, and construction spending for August increased as expected by 0.5%.

Additionally, the revised PMI for manufacturing in September also exceeded expectations, coming in at 49.8. These figures suggest the robustness of the U.S. economy and have supported Dollar buying.

■ Summary

In light of these factors, today’s forex market has seen a strong Dollar affecting USD/JPY, EUR/USD, and EUR/JPY, among other Yen crosses.

Furthermore, the crude oil market has experienced a decline due to the strong Dollar and concerns about weakening demand, suggesting that global economic conditions, interest rate trends, and other factors will continue to have a significant impact on market dynamics.

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