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USD/JPY gains as US Dollar benefits from risk aversion, PMI data weigh

  • USD/JPY posts modest gains as the US Dollar remains supported by risk aversion.
  • US PMI data point to slowing growth alongside rising inflation pressures.
  • Diverging monetary policy expectations between the US and Japan shape the outlook.

USD/JPY trades around 158.70 on Tuesday at the time of writing, up 0.16% on the day, supported by a US Dollar (USD) that maintains a bullish bias amid ongoing geopolitical and economic uncertainty.

The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is holding near 99.30 after easing from 99.50, reflecting sustained demand for the US currency. Escalating tensions in the Middle East continue to drive safe-haven flows while fueling concerns about a broader global economic slowdown.

In the United States (US), the latest preliminary S&P Global Purchasing Managers Index (PMI) data highlight a loss of momentum in economic activity. The Composite PMI came in at 51.4 in March, down from 51.9, marking its lowest level in eleven months. The Services PMI also declined to 51.1 from 51.7, while the Manufacturing PMI showed relative resilience, rising to 52.4 from 51.6. According to S&P Global Chief Business Economist Chris Williamson, the data point to an “unwelcome combination” of slowing growth and rising inflation, reinforcing stagflation risks.

This environment complicates the task of the Federal Reserve (Fed), which now faces a delicate balance between supporting growth and containing inflation. Markets are increasingly expecting the Fed to hold interest rates steady through the year, a notable shift from earlier expectations of policy easing.

On the Japanese side, the Japanese Yen (JPY) remains relatively stable despite softer inflation data in February. The Consumer Price Index (CPI) rose 1.3% YoY, down from 1.5%, while core inflation eased to 1.6%. However, underlying inflationary pressures remain above the Bank of Japan’s (BoJ) projections.

According to analysts at BBH, USD/JPY continues to trade without a clear direction just below the 159.00 level. The bank notes that strong wage dynamics in Japan, particularly from spring wage negotiations, could support a resumption of monetary tightening. A rate hike at the April 28 meeting is therefore seen as a possibility, which could provide additional support to the JPY over time.

In this context, the pair remains caught between a US Dollar supported by safe-haven demand and a Japanese Yen that could benefit from a more hawkish shift in Japanese monetary policy.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.26%0.38%0.24%0.25%0.62%0.66%0.59%
EUR-0.26%0.09%-0.02%-0.01%0.35%0.40%0.33%
GBP-0.38%-0.09%-0.09%-0.10%0.26%0.31%0.24%
JPY-0.24%0.02%0.09%0.02%0.38%0.42%0.35%
CAD-0.25%0.01%0.10%-0.02%0.36%0.40%0.34%
AUD-0.62%-0.35%-0.26%-0.38%-0.36%0.05%-0.05%
NZD-0.66%-0.40%-0.31%-0.42%-0.40%-0.05%-0.07%
CHF-0.59%-0.33%-0.24%-0.35%-0.34%0.05%0.07%

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).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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