- The dollar index receives support from an improved market feeling.
- President Trump announced a commercial agreement with Japan that includes a 15% tariff on Japanese exports to the United States.
- Trump criticized the president of the Federal Reserve, Jerome Powell, stating that he will be out in eight months.
The dollar index (DXY), which measures the value of the US dollar (USD) compared to six main currencies, stops its three -day loss streak and is quoted around 97.50 during Wednesday’s Asian hours. Inverters are likely to observe the data of the US Purchase Managers Index (PMI) of the US S&P Global for July, which will be published later on Thursday.
The president of the United States (USA), Donald Trump, announced a commercial agreement with Japan that includes a 15% tariff on Japanese exports to the US as part of the agreement, Japan will invest 550,000 million $ in the US and open its markets to key US products.
President Trump said during a meeting with the president of the Philippines, Bongbong Marcos, on Tuesday that “I think we will obtain a commercial agreement; we are close to a commercial agreement.” I don’t care if Philippines gets along with China, he added.
Trump also took the opportunity to renew his criticism of the president of the Federal Reserve (Fed), Jerome Powell, saying: “Powell will be out there soon; he has to be out in eight months.” Trump argued that the economy is still strong and said that Fed maintains too high interest rates, insisting: “We should be at 1%.”
On Monday, US Treasury Secretary Scott Besent said the Trump administration prioritizes the quality of trade agreements on its temporality. “We are not going to hurry for the simple act of making agreements,” Besent told CNBC.
US Dollar – Frequently Questions
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 in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
