At the time of writing, USD/JPY has rebounded around 154.50 on Friday, up 0.90% on the day, helped by a rebound in the US Dollar (USD) after several weeks of weakness. The move comes as markets reassess the outlook for monetary policy in the United States (US) and Japan.
The US dollar strengthened after US President Donald Trump expressed his support for Kevin Warsh as head of the Federal Reserve (Fed). If confirmed by the Senate, Kevin Warsh will replace Jerome Powell, whose term expires in May. Investors, who were initially wary of a very dovish nomination due to the president’s repeated calls for lower interest rates, instead view Warsh as a relatively hawkish option. The former Fed governor is seen as an institutional figure who has helped ease recent concerns about the central bank’s independence.
The US dollar also finds support in the form of stronger than expected inflation data. The US Producer Price Index (PPI) rose 0.5% m/m in December, after rising 0.2% in November, while the annual rate stands at 3.0%, above expectations. The core measure surprised even more, showing a monthly gain of 0.7% and an annual rate of 3.3%, signaling that upstream inflation pressures remain sturdy.
However, comments from Federal Reserve officials remain mixed. Governor Christopher Waller said at the last meeting that he favored a 25 basis point cut in interest rates, arguing that monetary policy remains too tight compared to the neutral level near 3%. In turn, Atlanta Fed President Raphael Bostic called for patience, emphasizing the need for evident progress towards the 2% inflation target.
In Japan, the latest data reinforces the contrast with the dynamics in the US. CPI data in Tokyo showed a cooling of inflation in January. Headline inflation rose 1.5% y/y after 2% in December, while core inflation rates fell to 2%, below forecasts. This moderation in price pressures reduces the urgency for the Bank of Japan (BoJ) to raise interest rates.
The BBH note suggests that the Bank of Japan can afford to be patient before resuming its monetary tightening cycle. Interest markets have reduced the likelihood of a March hike, now favoring a rate hike in April. Weaker activity indicators, including a decline in retail sales m/m, confirm this cautious stance.
Today’s US dollar price
The table below shows the current percentage change of the United States Dollar (USD) against the major listed currencies. The US dollar was strongest against the Australian dollar.
| USD | EUR | GBP | JPY | BOOR | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.81% | 0.76% | 0.96% | 0.80% | 1.22% | 0.89% | 0.86% | |
| EUR | -0.81% | -0.05% | 0.11% | -0.01% | 0.42% | 0.08% | 0.05% | |
| GBP | -0.76% | 0.05% | 0.17% | 0.04% | 0.46% | 0.13% | 0.11% | |
| JPY | -0.96% | -0.11% | -0.17% | -0.14% | 0.27% | -0.06% | -0.08% | |
| BOOR | -0.80% | 0.01% | -0.04% | 0.14% | 0.42% | 0.08% | 0.07% | |
| AUD | -1.22% | -0.42% | -0.46% | -0.27% | -0.42% | -0.33% | -0.29% | |
| NZD | -0.89% | -0.08% | -0.13% | 0.06% | -0.08% | 0.33% | -0.02% | |
| CHF | -0.86% | -0.05% | -0.11% | 0.08% | -0.07% | 0.29% | 0.02% |
The heat map shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column and the quote currency from the top row. For example, if you select 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).
