Euro tries to regain footing as the dollar faces risks

The Japanese yen rose in Asian trade on Thursday against a basket of major rivals, resuming gains against the dollar after a two-day hiatus amid renewed haven demand on the currency as investors assess trade risks between the US and China.

Global momentum took a gradual back seat after a recovery surge, amid mixed signals from US President Donald Trump on his plans with the China tariffs. 

Reports indicate the Bank of Japan will likely dismiss risks from US tariffs on the cycle of higher wages and inflation, crucial for continuing to raise interest rates.

The Price

The USD/JPY price fell 0.55% today to 142.60 yen per dollar, with a session-low at 142.60.

The yen lost 1.3% on Wednesday against the dollar, the second loss in a row, and the heftiest since December 2024, marking a week low at 143.57 as the global markets rebounded.

Mixed Signals

Trump asserted the US goal of reaching a fair trade deal with China, however, he once more threatened new tariffs on Beijing if no deal is reached.

US Treasury Secretary Scott Bessent said Trump didn’t propose to unilaterally remove tariffs from China, asserting the US will not cut tariffs on China by over 100%.

Bessent said there’s no clear timeline for communications between both sides, with the process of complete trade rebalancing potentially taking two or three years.

The markets are beginning to see the Trump’s administration’s sensitivity towards the performance of the financial markets, with decisions such pausing reciprocal tariffs and backing off plans to sack Fed Chair Powell as reflections of such considerations.

Bank of Japan

The Bank of Japan is widely expected to hold interest rates steady at this month’s policy meeting, while dismissing the impact of US tariffs on the current cycle of increasing wages and inflation.

The BOJ is likely to maintain its goal of gradual interest rate hikes in the future amid efforts to normalize the monetary policy.