USD/JPY pulls back below 154.00 as Trump confirms Warsh as Fed Chair

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The US Dollar maintains a moderate bid tone against the Japanese Yen on Friday, but has retreated from session highs at 154.40, and is trading at 153.90 at the time of writing, after Trump confirmed that former Federal Reserve (Fed) governor Kevin Warsh will replace the current bank Chairman Jerome

USD/JPY is retreating from session highs above 154.00 but keeps a moderate bullish tone.
Trump has nominated former Fed governor Kevin Warsh as the next Fed Chief.
In Japan, Tokyo CPI data showed cooling in price pressures, easing pressure on the BoJ to hike rates immediately

The Dollar had been appreciating against its main peers earlier on Friday following news reports pointing to Warsh as Trump's pick for the Fed. Warsh is seen by the market as a guarantee that the central bank will maintain its independence, which has eased concerns about a more dovish pick.

Furthermore, news reporting that US Senate Democrats and Republicans have reached an agreement on a package of spending bills has boosted hopes that another government shutdown can be averted, and provided additional support for the Greenback.

Earlier in the week, the Greenback drew support from comments by US Treasury Secretary Scott Bessent, who assured that Washington pursues a strong-dollar policy. Bessent also denied rumours that US and Japan authorities might be preparing a coordinated intervention to support the Yen, which sent the US Dollar tumbling in the first half of the week.

In Japan, Tokyo Consumer Price Index (CPI) data revealed that price pressures continued to cool in January. The core PPI eased to the Bank of Japan’s 2% target from 2.3% in December and 2.8% in November, a disinflationary trend that lifts pressure on the central bank to hike interest rates immediately.

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.