USD/JPY jumps to near 149.00 after soft US CPI data

USD/JPY soars to near 149.00 as the US Dollar gains after soft US inflation data for February.
Cooling US inflation is expected to boost Fed dovish bets.
The Japanese Yen underperforms despite Japan’s firms agreed for further wage hikes.

The USD/JPY pair surges to near 149.20 during North American trading hours on Wednesday. The asset strengthens as the US Dollar (USD) gains slightly despite the release of the softer-than-expected United States (US) Consumer Price Index (CPI) report for February. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, advances to near 103.75 from an over four-month low of 103.20 posted on Tuesday.

US Dollar PRICE Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.33%	0.12%	0.68%	-0.18%	0.14%	0.18%	0.15%
EUR	-0.33%		-0.20%	0.37%	-0.51%	-0.20%	-0.15%	-0.19%
GBP	-0.12%	0.20%		0.58%	-0.29%	0.02%	0.06%	0.03%
JPY	-0.68%	-0.37%	-0.58%		-0.85%	-0.53%	-0.50%	-0.52%
CAD	0.18%	0.51%	0.29%	0.85%		0.32%	0.36%	0.33%
AUD	-0.14%	0.20%	-0.02%	0.53%	-0.32%		0.04%	0.02%
NZD	-0.18%	0.15%	-0.06%	0.50%	-0.36%	-0.04%		-0.03%
CHF	-0.15%	0.19%	-0.03%	0.52%	-0.33%	-0.02%	0.03%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick 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).

The US CPI report showed that the headline inflation rose by 2.8%, slower than estimates of 2.9% and the 3% increase seen in January. The core CPI – which excludes volatile food and energy prices – cooled down to 3.1% from the prior reading of 3.3%. Economists projected a slowdown in the underlying inflation data but at a moderate pace to 3.2%. On month, both headline and core CPI grew by 0.2%, slower than expectations of 0.3%.

Cooling inflationary pressures are expected to force traders to raise bets supporting the Federal Reserve (Fed) to reduce interest rates in the May meeting. On Friday, Fed Chair Jerome Powell said that the restrictive monetary policy stance won’t long last “if labor market unexpectedly weakens or inflation falls more than expected”.

The outlook of the US Dollar remains weak in past few weeks as investors see US President Doanald Trump’s tariff agenda leading to an economic slowdown, assuming that higher import duties would lead to a sharp decline in the purchasing power of households.

Meanwhile, the Japanese Yen (JPY) is underperforming its peers even though big Japanese firms have agreed to substantial wage hikes for the third year in a row, Reuters report. Such a scenario would boost inflation expectations and bets supporting the Bank of Japan (BoJ) to raise interest rates again this year.

US Dollar FAQs

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

How do the decisions of the Federal Reserve impact the US Dollar?

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

What is Quantitative Easing and how does it influence the US Dollar?

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

What is Quantitative Tightening and how does it influence the US Dollar?

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.