The Japanese yen declined in Asian markets on Thursday against a basket of major and minor currencies, extending losses for the second consecutive day against the US dollar. The yen moved further away from its highest level in four weeks amid continued profit-taking and corrective movement.

The US dollar, meanwhile, continued to recover from its lowest levels in more than three years, supported by renewed buying interest from lower levels and ahead of the June employment report due before the Independence Day holiday in the United States.

Expectations for a potential interest rate hike by the Bank of Japan in July have diminished following its latest meeting, with markets awaiting further economic data on inflation, wages, and unemployment in the worlds third-largest economy.

Price Outlook

The dollar rose against the yen by 0.2% to 143.91 on Thursday, up from the opening price of 143.64, after hitting a session low of 143.44.

The yen lost 0.2% against the dollar at Wednesdays close, marking its first daily loss in three sessions, as traders locked in profits from the four-week high at 142.68.

The US Dollar

The US Dollar Index rose by 0.15% on Thursday, extending gains for a second session as the greenback continues to recover from a three-year low of 96.38. The rebound reflects sustained strength in the dollar against major and minor currencies.

Beyond bargain buying, the dollar gained further support from optimism surrounding a trade deal between the US and Vietnam, raising hopes of similar future agreements ahead of the July 9 tariff deadline.

President Donald Trump announced Wednesday that Vietnam had signed a trade agreement with the US, potentially encouraging other countries to follow suit.

Despite the lack of detailed information, Trump stated that Vietnamese goods would face a 20% tariff, while trans-shipped goods from third countries via Vietnam would be subject to a 40% rate.

Chinana from Saxo Bank noted that attention now shifts to Chinas response, given the direct targeting of trans-shipped goods with the higher tariff. He added that this move signals a clear reshaping of global supply chains, with the potential for further disruption ahead.

US Jobs

Global markets are closely watching the US Labor Departments June jobs report, set for release on Thursday ahead of the July 4th holiday.

Data released Wednesday showed that US companies shed jobs in June for the first time since January 2022, prompting traders to adjust their expectations regarding the timing of potential Fed rate cuts.

Following the report, CMEs FedWatch tool indicated that the probability of a 25 basis point rate cut in July rose from 20% to 25%, while the odds of maintaining current rates dropped from 80% to 75%.

Japanese Interest Rates

Expectations for a 25-basis-point rate hike by the Bank of Japan in its July meeting remain below 40%.

Investors are awaiting further data on inflation, unemployment, and wage growth in Japan before reassessing the likelihood of a rate move.