• US economy adds 315K jobs in August, Unemployment rate rises to 3.7%.
• USD/JPY pulls back amid a weaker US dollar after NFP.
• Yen remains under pressure, now on risk appetite.

The USD/JPY is falling modestly on Friday, after hitting earlier at 140.79, the highest level since 1998. A weaker US Dollar across the board weighed on the pair following the official US employment report.

US yields retreat sharply

Non-farm payrolls rose by 315K in August against expectations of a 300K increase. The unemployment rate rose unexpectedly from 3.5% to 3.7%, however, the labor participation rate also rose.

After the report, US yields dropped sharply favoring the decline in USD/JPY. The US 10-year yield fell to 3.17% and the 2-year fell from 3.52% to 3.40%. At the same time, equity prices in Wall Street rose. The Dow Jones was rising by 0.81% and the Nasdaq by 0.79%.The Japanese yen failed to stage a broad-based recovery on the back of the improvement in risk sentiment.

Despite falling on Friday, USD/JPY is about to post the third consecutive weekly gain and the highest close since 1998. The divergence between the Bank of Japan and the Federal Reserve’s monetary policy continues to drive the pair to the upside. At their next meeting, the BoJ is expected to keep the ultra-expansive stance while the Fed is seen raising rates by 50 or 75 basis points.

Technical levels