USD/JPY hovers below 145.50 after China reduces FX RRR, 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 decided to reduce the Forex Reserve Requirement Ratio (FX RRR) to 4% from 6% prior, starting from September 15. This would improve the ability of local banks to release more US Dollars (USD) in terms of slowing down the weakening pace of the Chinese Yuan.

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

The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against the six other major currencies, trades lower around 103.50 at the time of writing. The Greenback retreats from the previous day’s gains ahead of the ahead of upcoming releases of macroeconomic data from the United States (US). These datasets include US Nonfarm Payrolls Average Hourly Earnings, and ISM Manufacturing PMI are scheduled to be released later in the day.

However, the buck experienced upward support attributed to the US inflation data released on Thursday, which is considered to be the preferred gauge index of inflation by the Federal Reserve (Fed). The US Core Personal Consumption Expenditures (PCE) - Price Index (MoM) rose to 4.2% in July as per the market consensus, from 4.1% prior. US Initial Jobless Claims for the week ending on August 25, reported 228K figure against the expectations of 235K and the previous 232K.