USD/JPY plunges to near 155.80 amid fragile US Dollar, Japan’s intervention call
- USD/JPY plummets to near 155.80 as the US Dollar outperforms across the board.
- The Fed is expected to deliver at least two interest rate cuts in 2026.
- Japan’s FM Katayama warns against one-sided, excessive moves against the Yen.
The USD/JPY pair trades 0.75% lower to near 155.80 during the European trading session on Tuesday. The pair faces severe selling pressure as the US Dollar (USD) underperforms amid expectations that the Federal Reserve (Fed) will deliver more interest rate cuts in 2026 than it had signaled in the monetary policy announcement on December 17.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, revisits an over 11-week low near 97.85.
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 | -0.35% | -0.40% | -0.69% | -0.36% | -0.58% | -0.79% | -0.60% | |
| EUR | 0.35% | -0.05% | -0.35% | -0.00% | -0.24% | -0.44% | -0.25% | |
| GBP | 0.40% | 0.05% | -0.27% | 0.04% | -0.18% | -0.39% | -0.20% | |
| JPY | 0.69% | 0.35% | 0.27% | 0.33% | 0.13% | -0.13% | 0.11% | |
| CAD | 0.36% | 0.00% | -0.04% | -0.33% | -0.20% | -0.44% | -0.23% | |
| AUD | 0.58% | 0.24% | 0.18% | -0.13% | 0.20% | -0.21% | -0.02% | |
| NZD | 0.79% | 0.44% | 0.39% | 0.13% | 0.44% | 0.21% | 0.19% | |
| CHF | 0.60% | 0.25% | 0.20% | -0.11% | 0.23% | 0.02% | -0.19% |
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).
The CME FedWatch tool shows there is a 73.8% chance that the Fed will reduce interest rates at least 50 bps next year. This is contrary to what the Fed’s dot plot showed last week. As per the dot plot, policymakers collectively see the Federal Fund Rate dropping to 3.4% from current levels of 3.50%-3.75%, suggesting there will be only one interest rate cut in 2026.
Fed dovish expectations have been intensified due to weak job market conditions and signs from a slew of previous Consumer Price Index (CPI) reports that there was a limited impact of tariffs on inflation.
Going forward, the next trigger for the US Dollar will be the flash Q3 Gross Domestic Product (GDP) data, which will be published at 13:30 GMT. Investors will closely monitor the data to get fresh cues on the current economic health.
Meanwhile, the outperformance from the Japanese Yen (JPY), following warnings of Japan’s intervention by Finance Minister (FM) Satsuki Katayama to support the currency against one-sided excessive moves, has weighed heavily on the pair.
Earlier in the day, FM Satsuki Katayama said, “Japan has a free hand in dealing with excessive moves in the Yen.” She added that the administration will take “appropriate action against excessive moves”.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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