USD/JPY slips below 145.50 after China FX RRR cut, focus remains on US NFP

• USD/JPY is experiencing losses due to China’s fiscal measure and upbeat PMI.

• PBoC reduced FX RRR to 4% to slow down the weakening pace of the Chinese Yuan.

• Greenback retreats from the recent gains ahead of the US economic data.

USD/JPY trades lower around 145.40, extending losses for the second consecutive day during the European session on Friday. The pair is experiencing downward pressure as a result of an announcement by the People’s Bank of China (PBoC) regarding the recent fiscal measures.

The central bank has decided to reduce the Forex Reserve Requirement Ratio (FX RRR) to 4% from 6% earlier, effective September 15. This will improve the ability of local banks to release more US dollars (USD) given the weaker Chinese yuan.

Additionally, China’s upbeat Caixin manufacturing PMI for August contributed to improving market optimism. The data posted a reading of 51.0, compared to the market consensus of 49.3, up from a previous reading of 49.2 in July.

The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against six other major currencies, was trading around 103.50 at the time of writing. The greenback retreated from the previous day’s gains ahead of the release of upcoming macroeconomic data from the United States (US). These datasets include US nonfarm payrolls average hourly earnings, and the ISM Manufacturing PMI will be released later in the day.

However, the buck experienced upward support thanks to US inflation data released on Thursday, which is considered the preferred gauge of inflation by the Federal Reserve (Fed). US Core Personal Consumption Expenditures (PCE) – The price index (MoM) rose to a market consensus 4.2% in July, up from 4.1% previously. US initial jobless claims for the week ended August 25 reported a figure of 228K, versus 235K and the previous expectation of 232K.