Gold backs off two-week high as dollar rebounds

The Japanese yen rose in Asian trade on Tuesday against a basket of major rivals, resuming gains against the dollar after a short hiatus and hitting a four-week high on strong haven demand amid concerns about US debt levels. 

Gains are also bolstered by the increasing odds of a Japanese interest rate hike in June in response to mounting inflationary pressures. 

The Price

The USD/JPY price  fell 0.5% today to 142.11, the lowest since April 29, with a session-high at 142.98.

The yen lost 0.2% on Monday against the greenback, the second loss in three days.

US Debt 

US President Donald Trump said on Sunday that his tax reform bill will likely undergo big changes in the Senate.

According to the Congressional Budget Office, the bill will add $3.8 trillion to the government’s $36.2 trillion debt pile in the next ten years.

The huge US debt burden is back in the spotlight after Moody’s US credit rating downgrade last week and weak demand on government notes.

Investor confidence in US assets was further damaged by President Trump’s aggressive tariff policies in recent months.

Japanese Rates

Earlier Japanese data showed consumer prices rose 3.5% in April, the highest pace since early y023, beating estimates of 3.4%, and up from 3.2% in March.

Following the data, the odds of a Japanese 0.25% interest rate hike in June rose from 30% to 40%.

Bank of Japan Deputy Governor Shinichi Uchida said the bank will continue to raise interest rates if the economy recovers from the negative impact of US tariffs, however he still cautioned that the economic outlook remains highly uncertain.

Now traders await important Japanese data on inflation, unemployment, and wages to gather more clues.