- USD/JPY sees more disadvantages below 142.00 DURs for a significant weakness of the US dollar.
- The aim of US President Trump is to reduce addiction to China for vital minerals.
- Investors are waiting for Fed Powell and Japanese National Data CPI for March.
A few USD/JPY is trying to maintain key support of 142.00 during the North American trade hours on Wednesday, the lowest level that has been recorded in more than four months. The pair faces pressure sales because the US dollar has been hardly affected by the intensification of the Trade War between the United States (USA) and China.
The US dollar index (DXY), which monitors the greenback value against six main currencies, after a short -term recovery on Tuesday returns to almost 99.50.
The tariff war between the US and China continued to escalate when President Donald Trump promises to reduce addiction to China for critical minerals that have an application in various industries, including defense and technology. The service between Beijing and Washington began when the former retired against the imposition of mutual tariffs, which has now increased to 125%.
Meanwhile, there is a growing expectation that Federal reserve (Fed) This year, interest rates will be aggressively reduced and will be aggressive at the US dollar. In the case of fresh stimuli at the outlook of the interest rate, investors of Fed are awaited by the chairman of Jerome Powell, which is scheduled for 17:30 GMT.
Investors await the National Consumer price index (Cpi) Data for March that will be released on Friday. Inflation data will affect the expectation of the market for Japanese banks (struggle) to reduce interest rates at a policy meeting in May. Economists expect the Japanese National CPI ex. Fresh food that increased faster at 3.2%, compared to 3% increase in February.
US DOLLAR FAQS
The US dollar (USD) is the official currency of the United States of America and “de facto” currency of a large number of other countries where it is in circulation beside local notes. It is the most traded currency in the world, which represents more than 88% of all global foreign exchange fluctuations, or on average $ 6.6 trillion in transactions daily, according to 2022. For most of its history, the US dollar was supported by gold until Bretton Woods in 1971, when the gold standard disappeared.
The most important single factor that affects the value of the US dollar is the monetary policy that is formed by a federal reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and support full job. Its primary tool to achieve these two goals is to adjust the interest rates. When prices are rising too fast and inflation is above 2% Fed’s goal, the Fed will increase rates, which helps USD. When inflation falls below 2% or the unemployment rate is too high, the Fed can reduce interest rates that weigh green.
In extreme situations, the federal reserve system can also print more dollars and enable quantitative release (QE). QE is a process by which the Fed significantly increases the flow of the loan in the stuck financial system. This is a non -standard political measure used when the credit has dried up because banks do not borrow each other (for fear of extending the default). This is the last possibility where the interest rates are unlikely to achieve the necessary result. The Fed’s weapon was an election in the fight against the credit crisis that occurred during the major financial crisis in 2008. This includes the printing of more dollars and their use to buy US government bonds mainly from financial institutions. QE usually leads to a weaker US dollar.
Quantitative tightening (QT) is a reverse process where the federal reserve system stops buying bonds from financial institutions and does not represent the principal of the bonds it brings in new purchases. It is usually positive for the US dollar.
