The US Dollar (USD) has maintained its strength against the Japanese Yen (JPY), driven by persistent high US inflation data. Federal Reserve Chairman, Jerome Powell, reiterated this point on May 14th at the Foreign Bankers’ Association event in Amsterdam.
He stated, “We did not expect this to be a smooth road. We’ll need to be patient and let the restrictive policy do its work. We think that it’s probably a matter of just staying at this stance for longer.” There is growing concern that sustained tighter monetary policy could eventually weaken job growth and risk a recession.
As of May 15th, this “patient policy approach” seems to be unfolding. The April CPI report, which measures the cost of goods and services in the U.S., rose 3.4% from one year ago. Core CPI, excluding food and energy items, increased 3.6% annually, marking the smallest increase since April 2021.
These numbers might alleviate recent fears about the necessity for future rate hikes, allowing the Federal Reserve (FED) to maintain its current restrictive policy. A couple more months of similar downward-trending CPI reports could shift the focus to when the FED might begin reducing rates. Recently, we have seen a downturn in USD against JPY, especially following today’s CPI report, which announced the smallest increase in Core CPI in three years.
That being said, the USDJPY chart (April 29th – May 15th) below, which compares USD against JPY, shows prominent USD appreciation, despite recent Bank of Japan (BOJ) currency interventions on April 29th and May 1st. The primary reason for continued JPY depreciation against USD is directly rated to the interest rate gap between the U.S. and Japan.
The USDJPY chart below includes two daily market data points (4:00 AM EST and 4:00 PM EST), highlighting the BOJ intervention times and the resilience of USD. Just before the first BOJ intervention on April 29th, USDJPY was trading just above 160.00. By May 3rd, after the second intervention, USDJPY reached a low of approximately 151.90. Following the graph through to May 15th, we see USDJPY settling at a rate similar to where it was prior to the BOJ interventions, demonstrating the resilience of the US Dollar, underpinned by higher U.S. interest rates.
The information contained herein is the property of Compagnie Financière Tradition S.A. or any of its subsidiaries (together “Tradition”). Any review, disclosure, dissemination, distribution or copying of the information, whether in full or in part, is strictly prohibited and only intended for confidential use by the designated recipient(s). All content is provided “as is”, without warranty of any kind, either express or implied, including without limitation, warranties of merchantability, fitness for a particular purpose, and non-infringement. Nothing herein constitutes investment advice or an offer, or solicitation of an offer to buy or sell any financial product. Any data consists of purely indicative prices and should not be relied upon to revalue any commercial positions held by any recipient. To the maximum extent of the law, Tradition specifically does not make any warranties or representations as to the appropriateness, quality, timeliness, accuracy or completeness of the information and shall not be liable for any inaccuracy, error, omission, interruption, timeliness, incompleteness, deletion, defect, failure of performance, alteration or use of any of the content displayed, regardless of cause, or for any damages resulting therefrom. Tradition services are not available to private or retail clients. This information is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to any applicable law or regulation. Copyright © Compagnie Financière Tradition S.A., 2023. Commercial in Confidence.
Recommended Content
Editors’ Picks

BoE expected to stand pat, eyes on statement language and vote split – LIVE
The Bank of England (BoE) is widely anticipated to maintain the bank rate at 4.75% following the December policy meeting. The underlying details of the monetary policy statement and the vote split could drive Pound Sterling's valuation.

EUR/USD retakes 1.0400 amid the post-Fed recovery
EUR/USD is recovering ground to near 1.0400 in the European session on Thursday. The pair corrects higher, reversing the hawkish Fed rate cut-led losses. Meanwhile, the US Dollar takes a breather ahead of US data releases.

Gold price recovers further from one-month low, climbs to $2,620 amid risk-off mood
Gold price attracts some haven flows in the wake of the post-FOMC sell-off in the equity markets. The Fed’s hawkish outlook lifts the US bond yields to a multi-month high and might the XAU/USD. Traders now look to the US Q3 GDP print for some impetus ahead of the US PCE data on Friday.

Aave Price Forecast: Poised for double-digit correction as holders book profit
Aave (AAVE) price hovers around $343 on Thursday after correcting more than 6% this week. The recent downturn has led to $5.13 million in total liquidations, 84% of which were from long positions.

Fed-ECB: 2025, the great decoupling?
The year 2024 was marked by further progress in disinflation in both the United States and the Eurozone, sufficient to pave the way for rate cuts. The Fed and the ECB did not quite follow the same timetable and tempo, but by the end of the year, the cumulative size of their rate cuts is the same: 100 basis points.

Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.