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The atrocious non-farms report for August, with no jobs added or lost, has prompted USD/JPY to move back down towards the lows seen on Wednesday.
Dollar-selling, which had been going on all morning, continued after the report, both on risk aversion based on worries about the health of the US economy and on the basis that QE3 is becoming more likely with each piece of bad data. Yesterday’s ISM manufacturing figure was not enough to increase hopes of more QE, but today’s non-farms is sufficiently bad to prompt economists (and the rest of Wall Street) to expect more easing by the Federal Reserve. Expectations of more currency intervention by Tokyo have also been pared back, since Japan would find it hard to muster the firepower for an intervention bigger than the one of 4 August, when it spent ¥4.5 trillion to no real long-term effect.
