The Japanese yen (JPY) fell 0.56% on Friday, while the US Dollar Index (DXY) climbed after Purchasing Managers' Index (PMI) data came in higher than predicted.
According to Friday's PMI report, US business activity rose to a two-year high in June, boosted by a resurgence in employment. Strong macroeconomic data and the Federal Reserve's (Fed) cautious attitude to interest rate decreases helped the DXY hit a seven-week high. Meanwhile, the Japanese yen continues to fall after the Bank of Japan (BOJ) stunned investors last week by deferring any reduction to its bond-buying programme until July.
Furthermore, the US Treasury has placed Japan to a list of possible currency manipulators. It could imply that the United States opposes the BOJ's operations in financial markets. The central bank spent almost 9.8 trillion Japanese yen ($61.64 billion) to stabilise the currency and keep it from falling to a record 34-year low.
Overall, while investors continue to expect the regulator to raise the base rate this year, the fundamental pressure on USD/JPY remains bullish as the current interest rate differential favours the US currency.
