USD/JPY plummets below 144.00 amid Trump-Powell policy tensions
- USD/JPY plunges below 144.00 amid tensions between US President Trump and Fed’s Powell over the interest rate policy.
- The USD Index posts a fresh three-year low around 97.00.
- The Japan’s government will likely revise GDP growth forecast for the year below 1%.
The USD/JPY pair is down over 0.8% to near 143.75 during European trading hours on Thursday. The pair faces a sharp selling pressure as the confirmation from United States (US) President Donald Trump that he will announce Federal Reserve (Fed) Chair Jerome Powell’s replacement, following Powell’s support for keeping interest rates on hold until the central bank gets clarity on the impact of tariffs.
On Wednesday, US President Trump called Jerome Powell “terrible” for not reducing interest rates, while speaking with reporters, even if inflation has cooled down in past few months and stated that he has three or four names for his replacement, Reuters reported.
Such a move has raised questions over the credibility of decisions to be taken by the Fed after Powell’s replacement, assuming that Donald Trump’s contender will prefer his economic agenda over the dual mandate.
Uncertainty surrounding the Fed’s future credibility has severely impacted the US Dollar’s (USD) exceptionalism, sending the US Dollar Index (DXY) to a fresh three-year low around 97.00.
Meanwhile, a sharp decline in the US Dollar has increased the safe-haven appeal of the Japanese Yen (JPY), which is outperforming across the board.
Japanese Yen PRICE Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.46% | -0.56% | -0.68% | -0.30% | -0.48% | -0.36% | -0.49% | |
| EUR | 0.46% | -0.04% | -0.24% | 0.18% | 0.02% | 0.10% | -0.01% | |
| GBP | 0.56% | 0.04% | -0.20% | 0.23% | 0.07% | 0.16% | 0.03% | |
| JPY | 0.68% | 0.24% | 0.20% | 0.40% | 0.24% | 0.30% | 0.21% | |
| CAD | 0.30% | -0.18% | -0.23% | -0.40% | -0.15% | -0.16% | -0.19% | |
| AUD | 0.48% | -0.02% | -0.07% | -0.24% | 0.15% | 0.00% | -0.04% | |
| NZD | 0.36% | -0.10% | -0.16% | -0.30% | 0.16% | -0.00% | -0.03% | |
| CHF | 0.49% | 0.00% | -0.03% | -0.21% | 0.19% | 0.04% | 0.03% |
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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
On the domestic front, Tokyo is expected to revise its Gross Domestic Product (GDP) growth forecast for the current year lower below 1% from 1.2% projected neat the end of 2024, Reuters reported. The reason behind a downward revision in growth forecasts for the current year is global trade risk prompted by the imposition of the tariff policy by the US.
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 found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
