USD/JPY seems fragile around 144.00 ahead of US PCE Inflation data
- USD/JPY trades weakly around 144.00 as Trump-Powell policy tensions have battered the US Dollar.
- The PCE inflation report is expected to show that price pressures grew at a faster pace on year.
- Soft Tokyo CPI data for June weighs on the Japanese Yen.
The USD/JPY pair trades with caution around 144.00 during the European trading session on Friday. The pair remained on the back foot due to continuous underperformance from the US Dollar (USD), following the announcement from United States (US) President Donald Trump that he will replace Federal Reserve (Fed) Chair Jerome Powell for not supporting interest rate cuts.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, strives to hold the fresh three-and-a-half year low around 97.00 posted on Thursday.
Market participants expect decisions from Donald Trump’s contender could be obligated to his economic agenda than the maintenance of the Fed’s dual mandate. Such a scenario has raised concerns over the Fed’s autonomous status and US Dollar’s exceptionalism and prompted Fed dovish bets.
Meanwhile, investors await the US Personal Consumption Expenditure Price Index (PCE) data for May, which will be published at 12:30 GMT. Economists expect the core PCE inflation, Fed’s preferred inflation gauge, is expected to have grown at a faster pace of 2.6% on year, compared to 2.5% in April.
In the Asia-Pacific region, soft Tokyo Consumer Price Index (CPI) data for June has weighed heavily on the Japanese Yen (JPY) by jeopardizing hopes of more interest rate hikes by the Bank of Japan (BoJ). The headline CPI rose moderately by 3.1%, against a 3.4% growth seen in May.
Japanese Yen PRICE Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.07% | 0.06% | 0.13% | 0.14% | 0.24% | 0.09% | -0.24% | |
| EUR | 0.07% | 0.07% | 0.17% | 0.19% | 0.27% | 0.02% | -0.23% | |
| GBP | -0.06% | -0.07% | 0.12% | 0.09% | 0.19% | -0.01% | -0.21% | |
| JPY | -0.13% | -0.17% | -0.12% | -0.00% | 0.10% | -0.22% | -0.30% | |
| CAD | -0.14% | -0.19% | -0.09% | 0.00% | 0.13% | -0.17% | -0.33% | |
| AUD | -0.24% | -0.27% | -0.19% | -0.10% | -0.13% | -0.25% | -0.41% | |
| NZD | -0.09% | -0.02% | 0.00% | 0.22% | 0.17% | 0.25% | -0.17% | |
| CHF | 0.24% | 0.23% | 0.21% | 0.30% | 0.33% | 0.41% | 0.17% |
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).
Tokyo CPI excluding Fresh Food, which is closely tracked by BoJ officials grew at a slower pace of 3.1%, compared to estimates of 3.3% and the prior reading of 3.6%.
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.