- USD/JPY is down more than 1% on Friday.
- Japanese PM Shinzo Abe announces resignation due to health concerns.
- USD remains under heavy selling pressure on Fed’s new policy strategy.
The USD/JPY pair fell sharply in the late Asian session and extended its slide in the remainder of the day to touch its lowest level since August 19th at 105.21. As of writing, the pair is down 1.18% on a daily basis at 105.30 and remains on track to close the second straight week in the negative territory.
Double whammy of risk aversion and USD weakness weighs on USD/JPY
Earlier in the day, Japanese Prime Minister Shinzon Abe announced his resignation over health issues and this development triggered risk-off flows, boosting demand for safe-haven JPY. During a speech on Friday, Abe noted that he will continue to fulfil his responsibilities until a new PM is approved and noted that they will continue to tap emergency budget reserve to fund new virus responses.
Meanwhile, the broad-based selling pressure surrounding the USD following the Federal Reserve’s announcement of a new policy strategy caused the pair to continue to push lower.
During his speech at the Jackson Hole Symposium on Thursday, FOMC Chairman Jerome Powell said that the Fed will target average inflation and prioritize employment over inflation. This dovish shift in the Fed’s policy outlook dragged the US Dollar Index to its lowest level in more than a week at 92.20.
On Friday, the data from the US showed that Personal Spending and Personal Income both rose more than expected in July but the impact on the USD was short-lived. At the moment, the US Dollar Index is down 0.65% on the day at 92.39.
Technical levels to watch for