Judging the trend of US dollar appreciation/Japanese yen depreciation
2025-03-28
■ The Trump administration's tariff policies are highly uncertain, further exacerbating concerns about reigniting inflation and economic slowdown.
■ Considering the mutual tariffs that will take effect in April and the Japan-US financial policy meeting in early May, it is necessary to carefully assess the trend of US dollar appreciation and Japanese yen depreciation.
The Trump administration's tariff policy remains full of uncertainty, further exacerbating concerns about rising inflation and economic slowdown. The Federal Reserve (FOMC) kept the policy interest rate unchanged at 4.25% -4.50% for two consecutive times at the meeting held from the 18th to the 19th. However, regarding the Federal Reserve's policy to reduce its balance sheet, it decided to scale back the monthly purchase of US Treasury bonds from $ 25 billion to $ 5 billion, starting in April (mortgage-backed securities remain unchanged). The newly released FOMC Executive Summary of Economic Projection (SEP) shows that the expected real GDP growth rate in the United States has been lowered, while the expectations for unemployment and inflation rates have been raised. In addition, the expected index for the next six months in the March US Consumer Confidence Index fell to the lowest level in 12 years, and the uncertainty of the economy and policies has suppressed the improvement of consumer confidence, resulting in the continued risk of stagflation that coexists with economic stagnation and rising prices.
The US dollar rebounded against the Japanese yen after stabilizing at a low of 148 yen on the 20th and rose to around 151 yen on the 25th. But on the 26th (US time), President Trump announced a 25% tariff on all non-US-made cars starting from April 3rd, causing the US dollar to fall to a low of 150 yen against the Japanese yen during today's Asian trading session. Market predictions suggest that the Federal Reserve will cut interest rates at least twice this year (by 0.25% each time), while the Bank of Japan will raise interest rates by another 0.25%. Therefore, it is currently difficult to assert that the trend of narrowing the US-Japan interest rate differential has been curbed. Before the Japan-US financial policy meeting in early May, the market will enter the stage of observing the trend of the US dollar against the Japanese yen. The March ISM US manufacturing index and non-farm payroll data released in the first week of April will also provide further guidance. Even if the US dollar breaks through the 200-day moving average against the Japanese yen (151.70 yen on the 26th), it is still necessary to maintain a cautious attitude and carefully judge whether the trend of US dollar appreciation/Japanese yen depreciation has truly returned before it recovers to the 50.0% (152.70 yen) or 61.8% (154.15 yen) retracement level of the decline from the January 10 high of 158.87 yen to the March 11 low of 146.52 yen.
■ Considering the mutual tariffs that will take effect in April and the Japan-US financial policy meeting in early May, it is necessary to carefully assess the trend of US dollar appreciation and Japanese yen depreciation.
The Trump administration's tariff policy remains full of uncertainty, further exacerbating concerns about rising inflation and economic slowdown. The Federal Reserve (FOMC) kept the policy interest rate unchanged at 4.25% -4.50% for two consecutive times at the meeting held from the 18th to the 19th. However, regarding the Federal Reserve's policy to reduce its balance sheet, it decided to scale back the monthly purchase of US Treasury bonds from $ 25 billion to $ 5 billion, starting in April (mortgage-backed securities remain unchanged). The newly released FOMC Executive Summary of Economic Projection (SEP) shows that the expected real GDP growth rate in the United States has been lowered, while the expectations for unemployment and inflation rates have been raised. In addition, the expected index for the next six months in the March US Consumer Confidence Index fell to the lowest level in 12 years, and the uncertainty of the economy and policies has suppressed the improvement of consumer confidence, resulting in the continued risk of stagflation that coexists with economic stagnation and rising prices.
The US dollar rebounded against the Japanese yen after stabilizing at a low of 148 yen on the 20th and rose to around 151 yen on the 25th. But on the 26th (US time), President Trump announced a 25% tariff on all non-US-made cars starting from April 3rd, causing the US dollar to fall to a low of 150 yen against the Japanese yen during today's Asian trading session. Market predictions suggest that the Federal Reserve will cut interest rates at least twice this year (by 0.25% each time), while the Bank of Japan will raise interest rates by another 0.25%. Therefore, it is currently difficult to assert that the trend of narrowing the US-Japan interest rate differential has been curbed. Before the Japan-US financial policy meeting in early May, the market will enter the stage of observing the trend of the US dollar against the Japanese yen. The March ISM US manufacturing index and non-farm payroll data released in the first week of April will also provide further guidance. Even if the US dollar breaks through the 200-day moving average against the Japanese yen (151.70 yen on the 26th), it is still necessary to maintain a cautious attitude and carefully judge whether the trend of US dollar appreciation/Japanese yen depreciation has truly returned before it recovers to the 50.0% (152.70 yen) or 61.8% (154.15 yen) retracement level of the decline from the January 10 high of 158.87 yen to the March 11 low of 146.52 yen.