USD/JPY drops below 158.00 amid weak US Dollar, Japan Takaichi calls snap election
- USD/JPY falls to near 157.85 amid a weakened US Dollar, following US-EU disputes.
- EU warns that US tariff threats could lead to a risk of a dangerous downward spiral.
- Japan's PM Takaichi announces plans to dissolve parliament’s lower house on January 23.
The USD/JPY pair trades 0.12% lower to near 157.85 during the European trading session on Monday. The pair is under pressure as the US Dollar (USD) underperforms broadly, following tariff announcement by United States (US) on several European Union (EU) members and the United States (US).
During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.2% lower to near 99.18.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.21% | -0.22% | -0.13% | -0.20% | -0.24% | -0.50% | -0.52% | |
| EUR | 0.21% | -0.00% | 0.09% | 0.02% | -0.03% | -0.29% | -0.31% | |
| GBP | 0.22% | 0.00% | 0.11% | 0.02% | -0.03% | -0.28% | -0.31% | |
| JPY | 0.13% | -0.09% | -0.11% | -0.09% | -0.13% | -0.39% | -0.42% | |
| CAD | 0.20% | -0.02% | -0.02% | 0.09% | -0.04% | -0.30% | -0.33% | |
| AUD | 0.24% | 0.03% | 0.03% | 0.13% | 0.04% | -0.27% | -0.28% | |
| NZD | 0.50% | 0.29% | 0.28% | 0.39% | 0.30% | 0.27% | -0.03% | |
| CHF | 0.52% | 0.31% | 0.31% | 0.42% | 0.33% | 0.28% | 0.03% |
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).
On Saturday, US President Donald Trump imposed 10% tariffs on EU members in retaliation for their opposition to Washington’s desire to purchase Greenland. In response, EU members have jointly condemned Trump’s tariff threats, calling them “blackmail”, which would be retaliated by equal countermeasures.
European Commission (EC) President Ursula von der Leyen has warned that territorial integrity and sovereignty are fundamental principles of international law, and these tariffs would undermine “transatlantic relations” that could risk a “dangerous downward spiral".
Meanwhile, US markets will remain closed on Monday on account of Martin L. King Birthday.
Though investors have underpinned the Japanese Yen (JPY) against the US Dollar (USD), the latter is underperforming its other peers as Japan’s Prime Minister (PM) Sanae Takaichi has announced that it will dissolve its parliament’s lower house on January 23. Takaichi added, “My administration will put an end to excessively tight fiscal policy.”
This week, the major trigger for the Japanese Yen will be the monetary policy announcement by the Bank of Japan (BoJ) on Friday. The BoJ is expected to hold interest rates steady at 0.75%.
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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