Dollar Correction – Here to Stay?
Yesterday marked President’s Day in the United States of America. The bank holiday and the lighter trading volumes that were observed did not lead to any significant volatility. Instead, lighter volumes allowed recent ranges in USD to solidify. Ahead of the bank holiday and into the end of last week the Dollar had been losing ground across the board. The conclusion that the President’s barking on tariffs might be greater than the bite the White House ultimately delivers was no small influence.
USD weakness has been readily observed throughout the market but no more so than in USDJPY. As a result of a constructive growth backdrop in Japan and a rate hike last month, the Yen is exposing USD weakness. Despite constructive domestic growth in Japan, an emerging faltering in US economic hard and soft data is exposing cracks in the global growth narrative. This has proved to be positive for the risk-correlated Japanese currency.
Ultimately, the threat of tariffs come the second quarter of 2025 may be greater than ever. As part of this administration’s ‘American First’ trade agenda the department of commerce and key officials will be required to produce a report on those nations who have unfair terms of trade with the USA. Based upon this review, the White House will take its next steps on tariffs. The weaker US Dollar that we have seen on a spot basis is as result of the fact tariffs and growth are less of a threat for now. Despite its recent outperformance, JPY may not escape the clutches of tariffs with Japanese exports responsible for more than 5% of the deficit in the US.
Discussion and Analysis by Charles Porter
Related Insights
Daily Brief – Forgiven
Charles Porter
Tue 10 Mar 2026
Forgiven Even with an equity correction underway at the start of yesterday’s session, it still appeared that the market was under-pricing the risk of a protracted conflict in the Middle East. FX and fixed income asset classes had reacted more severely with stronger defensive bids into currencies including the Dollar and Franc, but still the […]
Daily Brief – Where’s the Beta
Charles Porter
Thu 12 Mar 2026
Where’s the Beta Amongst FX, there exist currencies known as ‘commodity currencies’. This isn’t a fixed basket of currencies, however, particular candidates spring to mind when the group are mentioned. The foremost amongst the G10 are the Canadian, Australian and New Zealand Dollars. These currencies are so-called because they typically exhibit a positive correlation with […]
Daily Brief – Fade America
Charles Porter
Thu 26 Feb 2026
Fade America There have been times during Trump’s second term that have had markets and financial commentators alike calling for an era of ‘sell-America’. Sell-America is the notion describing a scenario in which investor sentiment sours towards the US so much so that valuations across US assets decline. This is a unique scenario because many […]
