U.S. Payrolls Unexpectedly Fall by 23,000 in July, Lifting Yen to 157
- U.S. nonfarm payrolls fell by 23,000 in July against forecasts of about a 80,000 gain.
- The unemployment rate slipped 0.1 point to 4.1%.
- Expectations of a September Federal Reserve rate hike receded after the release.
- Dollar selling picked up in New York and the yen traded in the 157 range.
- The yen has recovered close to 4% from the 164 level seen at April's intervention.
The July U.S. jobs report landed as a genuine shock: nonfarm payrolls fell by 23,000 against a consensus of roughly plus 80,000, a gap of about 100,000 jobs. That is not weaker than expected; it is the opposite direction. Unemployment slipped to 4.1%, down 0.1 point, a combination that usually signals people leaving the labour force.
The currency reaction came from expectations, not the print itself. Before the release, markets were pricing in a possible Federal Reserve rate hike in September. After it, those bets faded, dollar selling picked up in New York, and the yen traded in the 157 range, touching 157.45 late in the session. Measured from the 164 level that prompted official intervention at the end of April, the yen has recovered close to 4% in four months.
The backdrop differs from earlier yen rallies. The Bank of Japan lifted its policy rate to around 1% in June, a level unseen for roughly 31 years, so the rate gap is narrowing from both sides. Add the 11.7349 trillion yen of intervention disclosed the same day, and three forces now set the rate: U.S. rate expectations, Japan's tightening path, and official operations.
For practical purposes: converting one million yen costs about 6,250 dollars at 160 but roughly 6,369 dollars at 157, a 1.9% difference, so stage conversions rather than betting on a single level. Equity holders should separate price return from currency return, since unhedged Japan funds lose ground as the yen firms. Watch Jackson Hole, the September FOMC and BOJ meetings, and the August U.S. inflation print.
