- The USD/JPY attracts offers about 144.00, however, the panorama remains uncertain.
- Moody’s reduced the sovereign credit rating of the US to AA1, citing increasing concerns about debt.
- Ryosei Akazawa from Japan has a visit to Washington for the third round of commercial negotiations this week.
The USD/JPY torque gains land about 144.00 during European negotiation hours on Tuesday, but about 144.50 is still 0.2%. The torque attracts offers as the US dollar (USD) rebounds after visiting the weekly minimum, which was recorded on Monday. The dollar index (DXY), which follows the value of the dollar against six main currencies, finds temporary support about 100.10.
However, the general trend of the dollar remains uncertain since the rating of Moody’s has reduced the sovereign credit rating of the United States (USA) at a level to AA1 from AAA following the growing concerns about debt, which is expected to expand even more after the announcement of a “great and beautiful bill” this week. According to a Reuters report, the Fiscal Law of Republicans would increase the current debt of 36 billion dollars by $ 3 billion to 5 billion dollars.
The erosion of the US credit rating has further weakened the credibility of the US dollar, which is already beaten by Washington’s “always changing” ads about tariff policies.
At the national level, Federal Reserve officials (FED) continue to guide a “wait and see” approach since an increase in tariffs by the administration is expected to disagree the consumer inflation. Such scenario discourages the Fed to reduce interest rates.
In the Tokyo front, investors are looking for new clues about when Japan will close a bilateral agreement with the USA. This indicates that the Asian would not be with whom the US could announce some commercial agreement.
On Monday, the Economic Advisor of the White House, Kevin Hasset, said hopes of more commercial agreements soon. “I would not be surprised if there are more commercial agreements this week,” said Hasett.
During European negotiation hours, the Kyodo news agency reported that Japan is considering accepting lower tariff rates in the US and not demanding an exemption.
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 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.
