Japanese Yen gains against US Dollar despite renewed geopolitical risks
- Japanese Yen rises against the US Dollar even as geopolitical risks have resurfaced.
- The renewed Middle East war could be prolonged as the US has attacked Iranian infrastructure.
- The FOMC minutes show that policymakers see high inflation as the dominant risk.
The Japanese Yen (JPY) trades higher against the US Dollar (USD) despite renewed geopolitical risks. The USD/JPY pair is down 0.17% to near 162.35 as the US Dollar faces selling pressure even as the exchange of attacks between the United States (US) and Iran has de-anchored United States (US) inflation expectations again.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.15% | -0.23% | -0.16% | 0.07% | -0.15% | -0.69% | -0.29% | |
| EUR | 0.15% | -0.07% | -0.04% | 0.22% | 0.03% | -0.51% | -0.13% | |
| GBP | 0.23% | 0.07% | 0.04% | 0.29% | 0.10% | -0.43% | -0.05% | |
| JPY | 0.16% | 0.04% | -0.04% | 0.22% | 0.05% | -0.52% | -0.12% | |
| CAD | -0.07% | -0.22% | -0.29% | -0.22% | -0.19% | -0.73% | -0.34% | |
| AUD | 0.15% | -0.03% | -0.10% | -0.05% | 0.19% | -0.54% | -0.15% | |
| NZD | 0.69% | 0.51% | 0.43% | 0.52% | 0.73% | 0.54% | 0.38% | |
| CHF | 0.29% | 0.13% | 0.05% | 0.12% | 0.34% | 0.15% | -0.38% |
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).
At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.15% lower to near 100.900 even after recovering some of its early losses.
On Wednesday, United States (US) President Donald Trump said on the sidelines of the North Atlantic Treaty Organization (NATO) summit that our military forces might hit Iran again and would also attack the power and water infrastructure of the nation, if needed. The US attack on Iran’s infrastructure prompts fears that Middle East tensions could be prolonged, a scenario that will keep oil prices higher and global inflation projections de-anchored.
Meanwhile, the Federal Open Market Committee (FOMC) Minutes of the June policy meeting showed on Wednesday that officials are already concerned about upside inflation risks and several of them believe monetary conditions will tighten further.
On the Tokyo front, investors seek fresh cues regarding whether the Bank of Japan (BoJ) will raise interest rates again this year. The proposed revision in Japan’s annual economic policy blueprint by the government suggests that the central bank will continue on its gradual monetary tightening path.
According to Nikkei, the proposed revision underscores the BoJ’s independence while reaffirming its commitment to achieving stable inflation.
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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