USD/JPY plummets below 146.00 as soft US CPI data batters Greenback
- USD/JPY slides below 146.00 as the US Dollar retraces significantly due to soft US inflation data for April.
- The Fed is expected to keep interest rates steady in the July meeting.
- BoJ’s Uchida is confident of stable wage growth and inflation despite US tariffs-led global economic uncertainty.
The USD/JPY pair plunges to near 145.80 during European trading hours on Wednesday. The pair faces a sharp sell-off as the US Dollar (USD) has been hit hard by the soft United States (US) Consumer Price Index (CPI) data for April.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, extends its correction from the monthly high of 102.00 to near 100.50. The data showed on Tuesday that the US headline inflation fell to 2.3%, the lowest level seen since February 2021.
On Tuesday, Chicago Fed Bank President Austan Goolsbee expressed confidence that soft inflation and agreement between the US and China to reduce tariffs substantially paint a brighter inflation outlook, which could allow the central bank to lower interest rates, USA Today reported.
However, traders have not pared bets supporting the Federal Reserve (Fed) to leave interest rates steady in the current range of 4.25%-4.50% in the July policy meeting.
According to the CME FedWatch tool, the probability of the Fed keeping interest rates steady in the range of 4.25%-4.50% in July is marginally down to 63.3% from 65.1% seen on Tuesday.
Meanwhile, the Japanese Yen (JPY) performs strongly across the board as hopes of interest rate hikes by the Bank of Japan (BoJ) in the near term remain alive. BoJ Deputy Governor Shinichi Uchida is confident of sustained wage growth and inflation despite global economic uncertainty due to the fallout of US tariffs, Reuters reported.
Japanese Yen PRICE Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.43% | -0.27% | -1.07% | -0.08% | -0.09% | -0.24% | -0.56% | |
| EUR | 0.43% | 0.16% | -0.64% | 0.35% | 0.36% | 0.17% | -0.12% | |
| GBP | 0.27% | -0.16% | -0.82% | 0.19% | 0.19% | 0.00% | -0.28% | |
| JPY | 1.07% | 0.64% | 0.82% | 0.98% | 0.99% | 0.81% | 0.50% | |
| CAD | 0.08% | -0.35% | -0.19% | -0.98% | -0.00% | -0.16% | -0.47% | |
| AUD | 0.09% | -0.36% | -0.19% | -0.99% | 0.00% | -0.16% | -0.49% | |
| NZD | 0.24% | -0.17% | -0.01% | -0.81% | 0.16% | 0.16% | -0.31% | |
| CHF | 0.56% | 0.12% | 0.28% | -0.50% | 0.47% | 0.49% | 0.31% |
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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
Japan’s underlying inflation and medium- to long-term inflation expectations are likely to temporarily stagnate. But even during that period, wages are expected to continue rising as Japan’s job market is very tight, Uchida said.
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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