The USDJPY pair fell sharply to near 149.00 on Tuesday, facing intense selling pressure as the Japanese Yen outperforms, given its safe-haven status, while investors brace for the release of a detailed reciprocal tariff plan by US President Donald Trump on Wednesday.
Though the dollar also carries a safe-haven status, it struggles to attract bids as investors expect Trump’s tariffs will prompt economic risks in the US economy. It will be US importers who will bear the burden of higher tariffs and will pass them on to consumers. Such a scenario will significantly diminish the purchasing power of households.
According to the Washington Post, White House aides have drafted a proposal to impose 20% tariffs on most imports to the US.
The strength in the Japanese Yen is also driven by growing expectations that the Bank of Japan will raise interest rates in the May policy meeting. With inflation remaining above 2%, due to strong consumption and wage growth, the BoJ could deliver a 25 basis-point hike in May, analysts at ING said.
Meanwhile, the weak US ISM Manufacturing Purchasing Managers Index (PMI) for March and soft JOLTS Job Openings data for February have also exerted some pressure on the dollar. The ISM Manufacturing PMI came in lower at 49.0 against estimates of 49.5 and February’s reading of 50.3. A figure below 50.0 suggests that the manufacturing sector activity contracted.
US employers posted 7.57 mln jobs in February, slightly lower than the expectations of 7.63 mln and the prior release of 7.76 mln.
(Source: OANDA)