The US dollar was stronger across the board this morning, adding to gains made throughout this week. There are many factors contributing to the dollar’s current popularity, including a ‘flight to quality’ given that there is no evidence that the war between the US and Iran is likely to end anytime soon.
In addition, this week saw the release of hotter-than-expected US inflation. This showed up in numbers for both consumer prices and producer (wholesale) prices. US Treasury yields were up sharply as well, and this all reinforces expectations that the Federal Reserve, under the new chairmanship of Kevin Warsh, will be unable to loosen monetary policy further, something which is bound to annoy President Trump.
Meanwhile, the USD/JPY pair climbed above 158.60, taking the yen back down to levels last seen after the Japanese authorities intervened to strengthen the currency. This will be particularly bad news for Japan’s policymakers, who may be forced to intervene again, at great cost, should the USD/JPY get back up towards 160.00.
Source: TN Trader
Again, as with the UK, overall dollar strength is combining with political ineptitude to undermine domestic currency strength. In Japan’s case, there’s a government determined to cut taxes and boost fiscal stimulus. Yet it is faced with a central bank which is desperate to tighten monetary policy to curb inflation and support the yen.
