The dollar maintained its position at a two-week high against the yen during Wednesday because President Donald Trump increased trade tensions by announcing new tariff measures against major U.S. partners including Japan.
The dollar reached 147.19 yen before it dropped to 146.36 while maintaining a 1.5% weekly gain which represented its best performance since December. Trump announced new trade measures that included a 50% tariff on copper and additional tariffs for semiconductors and pharmaceuticals while warning seven countries would face these actions.
The Japanese yen faced continued weakness because investors believed it would not participate in upcoming trade negotiations. The United States and Japan have not achieved any progress in their negotiations while domestic politics shifts focus to an important upper house election which has sparked predictions about fiscal stimulus. Japanese bond yields increased because investors considered possible changes in policy direction.
The market interprets Trump’s actions as a strategic move to create pressure for faster agreements according to Pepperstone’s Michael Brown. The main objective behind this move is to accelerate the negotiation process rather than enforce all proposed tariffs.
The euro experienced a minor decline to $1.172 but strengthened against the yen as investors focused on Federal Reserve minutes for policy indications. The divergent interest rate expectations between markets have caused dollar depreciation because traders expect two Fed rate cuts this year while the ECB will only cut rates once.
