Dollar Strengthens, Yen Falls to Weakest Level Since July 2024
The US dollar strengthened broadly on Tuesday (January 13), while the Japanese yen fell to its weakest level since July 2024 amid market concerns that Japan will move towards looser fiscal and monetary policies. USD/JPY rose 0.6% to 159.11, fueling speculation that Japanese authorities could intervene again to stem what they consider to be excessive yen weakness.
Pressure on the yen intensified following political signals from Tokyo. Prime Minister Sanae Takaichi is said to be considering an early election (possibly in February), which markets believe could open the door to a looser deficit policy and a more dovish monetary stance.
Japanese Finance Minister Satsuki Katayama also stated that she and US Treasury Secretary Scott Bessent share concerns about the "one-way" weakening of the yen, emphasizing that the threat of intervention is not just talk.
From the US side, the dollar fell briefly after the inflation data was released, but then recovered. US CPI rose 0.3% (MoM) and 2.7% (YoY), while core CPI rose 0.2% (MoM) and 2.6% (YoY)—quite benign, but not enough to alter the belief that the Fed will keep interest rates on hold until price pressures subside.
Market reaction suggests that many traders had already positioned for higher inflation, so the softer releases actually boosted volatility among currencies.
In major markets, the Dollar Index (DXY) rose 0.28% to 99.15. The euro weakened to $1.1647, the pound fell to $1.3428, and the Australian dollar was at $0.668 (a brief bounce after the data). The dollar also received support from solid US jobs data on Friday, which reinforced expectations that the Fed would remain hawkish at its January 27–28 meeting.
Meanwhile, the market is also monitoring the Fed's independence issue after the US Department of Justice threatened indictment against Fed Chairman Jerome Powell over a building renovation project, and several global central bank officials released statements of support for Powell.
Trump is expected to announce a candidate to replace Powell in the coming weeks (Powell's term as chairman ends in May), and Trump views December's inflation data as supporting his push for interest rate cuts.
Beyond the macroeconomic environment, geopolitical tensions (Venezuela, Iran, Greenland) and a potential Supreme Court ruling on the legality of Trump's tariff policies also pose market risks.
In crypto assets, Bitcoin rose 3.12% to $93,811, helped by easing inflation concerns and risk-on sentiment shortly after the data release. (yds)
Source: Newsmaker.id
