USD/JPY extends losses below 143.60 amid broad-based Dollar weakness
- The US Dollar accelerates its decline on risk-off markets to hit weekly lows below 143.60.
Trump's tariff threats and hopes of further Fed easing are weighing on the USD. - Japanese Prime Minister Ishiba said that they are far from. a trade deal with the US.
US Dollar is among the weakest G8 currencies on Thursday. The risk-averse sentiment triggered by a fresh tariff threat by US President Trump, coupled with higher hopes of Fed cuts, is pushing the USD/JPY to fresh weekly lows below 143.60 l.
US CPI figures released on Wednesday revealed that inflation grew at a 0.1% pace in May and 2.4% year-on-year, below the 0.2% and 2.5% respective increases forecasted by market analysts.
These figures have eased concerns about the inflationary impact of Trump's ”Liberation Day” tariffs and boosted hopes that the Fed might cut interest rates again in September. The CME Fed Watch tool shows a nearly 60% chance of a 25 bps cut after the summer, up from 50% last week.
Trump's tariff threat has rattled markets
Earlier today, US President Trump announced that he will send letters to all trading partners specifying a set of demands that they will have to accept if they want to avoid higher tariffs from July 9. The threat boosted risk aversion and provided a fresh impulse to the Yen.
In Japan, Prime Minister Ishiba observed that they significant differences in the way of a trade agreement with the US and affirmed that he is not pursuing a particular timeline to reach a deal.
Somewhat later, Japan’s Chief Trade negotiator, Ryosei Akazawa, said that he is not aware of any discussions on US Treasuries and that any negotiation on that topic will be led by Finance Minister Kato.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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