- The USD/JPY sees more disadvantages below 142.00 due to the significant weakness of the US dollar.
- The US president Trump seeks to reduce China dependence for vital minerals.
- Investors expect the speech of the president of the Fed Powell and the data of the National CPI of Japan for March.
The USD/JPY torque struggles to maintain the key support of 142.00 during negotiation hours in North America on Wednesday, the lowest level seen in more than four months. The pair faces sales pressure since the US dollar has been hit hard by the intensification of the commercial war between the United States (USA) and China.
The US dollar index (DXY), which tracks the value of the dollar against six main currencies, goes back to about 99.50 after an ephemeral recovery movement to about 100.00 on Tuesday.
The tariff war between the US and China has intensified even more since President Donald Trump promises to reduce China dependence for critical minerals, which have application in various industries, including defense and technology. The dispute between Beijing and Washington began when the latter responded to the imposition of reciprocal tariffs by Trump, which have now increased to 125%.
Meanwhile, the growing expectations that the Federal Reserve (FED) cut interest rates aggressively this year have also weighed over the US dollar. To obtain new clues about interest rates, investors await the speech of the president of the FED, Jerome Powell, which is scheduled for 17:30 GMT.
In the front of Tokyo, investors expect data from the National Consumer Price Index (CPI) for March, which will be published on Friday. Inflation data will influence market expectations on whether the Bank of Japan (BOJ) will cut interest rates at the May policy meeting. Economists expect the Japan National CPI excluding fresh foods to have increased at a faster rate of 3.2%, compared to the 3% increase observed in February.
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
