Yen Strengthens as Diverging Monetary Policies Drive Gains

The Japanese yen strengthened past 142 per dollar, approaching its highest level of the year as Japan's and the US's monetary policies diverge. Bank of Japan board member Junko Nakagawa indicated that the central bank might continue to raise interest rates if inflation aligns with its forecasts. She noted that a tight job market and rising import prices could pose additional upward risks to inflation. Despite the rate hike in July, Nakagawa pointed out that real interest rates in Japan remain deeply negative. In contrast, the US Federal Reserve is widely anticipated to begin cutting rates this month, with policymakers cautioning about increasing risks to the labor market. Meanwhile, a private survey revealed that manufacturing sentiment in Japan fell to a seven-month low in September, reflecting concerns about weak demand from China. From a technical perspective, the first resistance level is at 141.70. If this level is surpassed, the next target levels will be 142.30 and 143.00. On the downside, the initial support is at 140.50; if this level is breached, the next support levels to watch will be 139.50 and 139.00.