- USD/JPY falls as the US dollar retreats after a stellar opening.
- Trump threatens to raise tariffs on Canada and Mexico for providing passage for China to supply illicit drugs into the US economy.
- Investors await US PCE and Tokyo CPI inflation data for October.
The USD/JPY pair falls near 153.00 in the North American session on Tuesday. The asset plummets as the US Dollar (USD) gives up all its intraday gains and turns negative after a strong open. The US Dollar Index (DXY), which tracks the value of the Dollar against six major currencies, falls near 106.50 after a strong opening around 107.50.
The Dollar had a stellar opening after United States (US) President-elect Donald Trump threatened to impose 25% tariffs on Canada and Mexico for giving China a free pass to supply illicit drugs to the United States (USA), as he said in a tweet on Truth.Social. To this end, Trump also announced imposing additional 10% tariffs on China, in addition to the 60% he already mentioned in the election campaign.
However, the US dollar is retreating as investors are confident that Scott Bessent, Trump’s nominee for Treasury Secretary, will maintain political stability despite delivering on Trump’s economic agenda. Bessent said in an interview with the Financial Times (FT) over the weekend that Trump’s policies will not increase inflationary pressures.
Looking ahead, investors await US Personal Consumption Expenditure (PCE) Price Index data for October for fresh clues on likely Federal Reserve (Fed) interest rate action in December , which will be published on Wednesday. Economists expect inflation data to have accelerated from September readings in annual terms. Month-over-month headline and core PCE inflation data are estimated to have grown steadily.
Meanwhile, the Japanese Yen (JPY) is performing strongly even as traders reduce expectations that the Bank of Japan (BoJ) will raise interest rates in December. Market participants expect political uncertainty in Japan to limit the BoJ’s potential to raise its key interest rates further. This week, investors will focus on Tokyo Consumer Price Index (CPI) data for October, due to be released on Thursday.
The Japanese Yen FAQs
The Japanese Yen (JPY) is one of the most traded currencies in the world. Its value is determined broadly by the performance of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of Japanese and US bonds or the risk sentiment among traders, among other factors.
One of the mandates of the Bank of Japan is currency control, so its movements are key for the Yen. The BoJ has intervened directly in currency markets on occasion, usually to lower the value of the Yen, although it often refrains from doing so due to the political concerns of its major trading partners. The BoJ’s current ultra-loose monetary policy, based on massive stimulus to the economy, has caused the depreciation of the Yen against its main currency pairs. This process has been exacerbated more recently by a growing policy divergence between the Bank of Japan and other major central banks, which have opted to sharply raise interest rates to combat decades-old levels of inflation.
The Bank of Japan’s ultra-loose monetary policy stance has led to increased policy divergence with other central banks, particularly the US Federal Reserve. This favors the widening of the spread between US and Japanese 10-year bonds, which favors the Dollar against the Yen.
The Japanese Yen is often considered 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. In turbulent times, the Yen is likely to appreciate against other currencies that are considered riskier to invest in.
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.
