Yen Hits Two-Week High on Dual Boost from Data and Safe Haven Demand

The Japanese Yen (JPY) surged to a two-week high against the US Dollar (USD) on Wednesday, driving the USD/JPY pair down by approximately 0.5%. This significant move was primarily fueled by a sharp increase in safe-haven demand after the US government officially entered a shutdown.

The resulting political uncertainty in the United States dramatically enhanced the Yen’s appeal as a safe-haven asset, particularly as confidence in the Dollar waned due to the temporary halt in federal operations.

The Yen received additional backing from positive Japanese economic data. The closely watched Tankan large manufacturers’ confidence index for the third quarter rose by one point to reach 14, precisely matching market expectations and reflecting an improvement in manufacturing sentiment. Furthermore, the final reading of the Japanese Manufacturing Purchasing Managers’ Index (PMI) for September was revised slightly higher, climbing from 48.4 to 48.5. While still below the 50-point threshold that separates expansion from contraction, this revision signaled a modest improvement in manufacturing activity.

The Yen further solidified its gains following a decline in US Treasury yields, which occurred after the release of the lackluster US private-sector employment report for September. The Yen benefited from a confluence of diverse factors—political and economic—most notably the US government shutdown, disappointing jobs data, and improving local economic indicators, which collectively boosted its standing in the global currency market.