USD/JPY plummets to near 152.00 on improving US-Japan trade relations
- USD/JPY falls sharply to near 152.00 as the Japanese Yen outperforms.
- US President Trump praises Japan’s PM Takaichi and expresses a strong relationship between the two nations.
- This week, the Fed is expected to cut interest rates while the BoJ is anticipated to hold them steady.
The USD/JPY pair plunges 0.6% to near 152.00 during the European trading session on Tuesday. The pair faces intense selling pressure as the Japanese Yen (JPY) outperforms its peers on improving trade relations between the United States (US) and Japan.
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 British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.10% | 0.21% | -0.58% | 0.05% | -0.01% | -0.06% | -0.12% | |
| EUR | 0.10% | 0.32% | -0.48% | 0.15% | 0.10% | 0.02% | -0.02% | |
| GBP | -0.21% | -0.32% | -0.77% | -0.16% | -0.22% | -0.28% | -0.34% | |
| JPY | 0.58% | 0.48% | 0.77% | 0.63% | 0.56% | 0.51% | 0.45% | |
| CAD | -0.05% | -0.15% | 0.16% | -0.63% | -0.06% | -0.11% | -0.18% | |
| AUD | 0.01% | -0.10% | 0.22% | -0.56% | 0.06% | -0.06% | -0.12% | |
| NZD | 0.06% | -0.02% | 0.28% | -0.51% | 0.11% | 0.06% | -0.06% | |
| CHF | 0.12% | 0.02% | 0.34% | -0.45% | 0.18% | 0.12% | 0.06% |
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).
Earlier in the day, officials from Japan and the US commented about strengthening trade ties between the two nations. Also, Japan’s cabinet has unveiled plans for how Tokyo will invest its committed $550 billion package in the US. Tokyo has stated that it will invest in various sectors in the US, such as power, pipelines, and its leading automaker Toyota has committed to setting up auto plants in the US worth up to $10B.
In response, US President Donald Trump has also praised the newly elected Japanese Prime Minister Sanae Takaichi and has expressed that “US-Japanese friendship is strong”.
On the domestic front, investors will focus on the Bank of Japan’s (BoJ) monetary policy, which will be announced on Thursday. The BoJ is expected to hold interest rates steady at 0.5%.
Meanwhile, the US Dollar (USD) trades lower amid firm expectations that the Federal Reserve (Fed) will cut interest rates in its monetary policy announcement on Wednesday. During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.15% lower to near the weekly low around 98.60.
During the European session, US President Trump has criticized Fed Chair Jerome Powell, while stating that Treasury Secretary Scott Bessent doesn’t want to join the Fed. “Powell is incompetent or a bad guy, and will be out in a few months,” Trump 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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