USD/JPY jumps to near 148.00, investors await US CPI data
- USD/JPY advances to near 148.00 as the US Dollar gains ahead of the US inflation data for August.
- Economists expect the US headline CPI to have grown at a faster pace of 2.9%.
- The Fed is certain to cut interest rates next week, while the BoJ is expected to maintain the status quo.
The USD/JPY pair trades 0.3% higher to near 148.00 during the European trading session on Thursday. The pair strengthens as the US Dollar (USD) trades higher against its peers ahead of the United States (US) Consumer Price Index (CPI) data for August, which will be published at 12:30 GMT.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades close to a three-day high around 98.00, at the time of writing.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.09% | 0.10% | 0.47% | 0.15% | 0.24% | 0.22% | 0.10% | |
| EUR | -0.09% | -0.01% | 0.24% | 0.06% | 0.11% | 0.15% | -0.03% | |
| GBP | -0.10% | 0.00% | 0.26% | 0.04% | 0.06% | 0.16% | -0.03% | |
| JPY | -0.47% | -0.24% | -0.26% | -0.26% | -0.20% | -0.12% | -0.30% | |
| CAD | -0.15% | -0.06% | -0.04% | 0.26% | -0.04% | 0.09% | -0.05% | |
| AUD | -0.24% | -0.11% | -0.06% | 0.20% | 0.04% | 0.04% | -0.14% | |
| NZD | -0.22% | -0.15% | -0.16% | 0.12% | -0.09% | -0.04% | -0.20% | |
| CHF | -0.10% | 0.03% | 0.03% | 0.30% | 0.05% | 0.14% | 0.20% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Investors will pay close attention to the US inflation data as it will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook. The US CPI report is expected to show that headline inflation rose at an annualized pace of 2.9%, faster than 2.7% in July. The core CPI – which excludes volatile food and energy items – is estimated to have grown steadily by 3.1%. On a monthly basis, both the headline and the core CPI are expected to have grown by 0.3%.
Currently, the CME FedWatch tool shows that traders see an 8% chance that the Fed will cut interest rates by 50 basis points (bps) to 3.75%-4.00% on September 17, while the rest point a standard 25-bps interest rate reduction.
Signs of inflationary pressures accelerating at a faster pace are unlikely to impact Fed dovish expectations, as the latest comments from a number of officials have signaled that they are more concerned about growing downside labor market risks. On the contrary, soft inflation data would prompt traders to raise bets supporting a bigger interest rate reduction by the Fed in the policy meeting next week.
Meanwhile, the next major trigger for the Japanese Yen (JPY) will be the Bank of Japan’s monetary policy announcement next week. The latest Reuters poll has shown that a majority of economists have projected that the BoJ will leave interest rates steady at 0.5%.
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 found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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