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US Dollar to Japanese Yen Exchange Rate Nears Worst 2019 Levels as Fed News Dampens Outlook

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US Dollar to Japanese Yen Exchange Rate Sold on Rising Federal Reserve Interest Rate Cut Bets

While the US Dollar (USD) is a safe haven currency, rising concerns that the US economy could be in for a slowdown have left the Japanese Yen (JPY) as the market’s safe haven currency of choice, and the US Dollar to Japanese Yen (USD/JPY) outlook has worsened.

USD/JPY has seen significant losses since mid-April, shedding essentially all of its 2019 gains. Last week was yet another sharp loss for USD/JPY, with the pair opening the week at the level of 109.30, and closing at the level of 108.27.

Losses have slowed down, but USD/JPY continues to trend lower this week so far. USD/JPY touched on a low of 107.87 this morning, and currently trends nearer the level of 108.02.

This puts it less than a Yen above 2019’s worst USD/JPY level, which was 107.42 in January.

The latest losses for the US Dollar to Japanese Yen exchange rate have been due to a combination of weaker US data, and US trade protectionism fears causing Federal Reserve interest rate cut bets to rise.

US Dollar (USD) Exchange Rates Tumble on Rising Expectations for a More Dovish Fed

The US Dollar has been weakening over the past week against many major currencies, due to fresh signs of weakness in the US economy, as well as protectionist rhetoric from US President Donald Trump.

This movement is continuing this week so far, as comments from Federal Reserve officials on recent US data has made investors more concerned that the US Central Bank could take a more dovish tone on monetary policy soon.

Overnight, St. Louis Fed President James Bullard said that a rate could ‘may be warranted soon’ due to the signs of weakness in the US economy and weaker US inflation.

On top of this, analysts such as Antje Praefcke from Commerzbank predict that the US Dollar will continue to be driven by trade developments:

‘As long as it (the Dollar) is at the center of the trade conflict, US yields fall due to concerns about real economic effects and the market is literally calling out for rate cuts, there are no positive arguments supporting the Dollar,’

Japanese Yen (JPY) Exchange Rates King of Safe Haven Demand

With Fed rate cut bets rising and the US Dollar weakening, the Japanese Yen has largely capitalised on its rival’s weakness.

For much of 2019 so far, expectations for continued resilience and strength in the US economy left the US Dollar as the market’s most appealing safe haven currency.

However, as US data increasingly shows signs of weakness, and concerns of the US economy being hit by trade protectionism rise, investors seeking safe haven currencies have been looking elsewhere.

The Japanese Yen is often the market’s safe haven of choice in times of global uncertainty where the US Dollar is unappealing as well.

The Yen did find a little additional support this week from May manufacturing data yesterday, which came in slightly stronger than expected.

US Dollar to Japanese Yen (USD/JPY) Exchange Rate Investors Anticipate Further US Data

With Federal Reserve interest rate cut bets taking focus for markets this week, US Dollar to Japanese Yen (USD/JPY) exchange rate investors are highly anticipating further indication of US economic health.

As a result, major US ecostats will be taking focus for the remainder of the week.

This afternoon, US factory orders will be published. Non-manufacturing PMI data will come in tomorrow, with trade balance data on Thursday and Non-Farm Payroll data on Friday.

If these notable stats beat market expectations, they could offer the US Dollar some fresh support and cause Fed interest rate cut bets to lighten.

However, a speech from Fed Chairman Jerome Powell set for this afternoon could be even more influential if the Chairman has any comments on the bank’s monetary policy outlook.

Essentially, the monetary policy outlook is most likely to have the biggest influence on the US Dollar to Japanese Yen (USD/JPY) exchange rate outlook this week.