The US dollar slips on soft PPI, but later surges to 34‑year high on sticky inflation.
Dollar weakens as PPI disappoints, USD/JPY dips below 159.00
The US dollar eased on Tuesday, pulling USD/JPY below 159.00 after weaker‑than‑expected producer price data and signals of potential peace talks between Washington and Tehran. The pair fell about 0.4% to around 158.85, confined to a tight 158.00–160.00 band as traders struggled to define a clear short‑term direction.
Data from the Bureau of Labor Statistics showed the March Producer Price Index rose 0.5% month‑on‑month, well below expectations of 1.2%. Core PPI, excluding food and energy, increased just 0.1% versus forecasts of 0.6%.
Gasoline prices jumped 15.7%, providing almost half of the headline gain, while the key services component was flat, a detail closely watched by the Federal Reserve for clues on underlying inflation.
Geopolitics briefly undercut safe‑haven demand for dollar
On the geopolitical front, US President Donald Trump said talks to restart peace negotiations with Iran could begin within two days. The prospect of diplomacy briefly reduced demand for the dollar as a safe‑haven currency, even as a naval blockade of Iranian ports, launched on Monday to restrict oil shipments, remained in place.
The Japanese yen continued to draw safe‑haven flows amid ongoing tensions in the Middle East, while the Bank of Japan’s policy stance played a smaller role in immediate trading dynamics.
Upcoming US releases, including weekly initial jobless claims and the Philadelphia Fed manufacturing survey, are seen as the next catalysts for near‑term dollar moves.
Technical picture: near‑term bearish bias, but uptrend intact
In intraday trading, USD/JPY hovered near 158.83, below the session’s opening level around 159.21, which acted as resistance. A clear break above that zone is needed to ease short‑term bearish pressure. On the downside, a sustained move lower would bring focus back to support near 158.00, the prior session low.
On the broader daily chart, the pair traded close to 158.84, above both the 50‑day and 200‑day exponential moving averages at 158.02 and 154.56 respectively. This keeps the wider uptrend intact. A decisive drop below the 50‑day average, however, would open the way for a test of longer‑term support near 154.56 and signal risks of a deeper pullback within the prevailing upward structure.
Softness proves temporary as CPI and Fed comments reset expectations
The brief weakening of the dollar proved short‑lived. Fresh consumer price data from earlier in the week highlighted persistent inflation, forcing a rapid repricing of the outlook for US monetary policy and dismantling expectations of an imminent policy pivot by the Federal Reserve.
Fed Chair Jerome Powell underlined this shift, saying recent data had not increased confidence that inflation is returning to the 2% target. He indicated the current restrictive stance may need to remain in place for longer, effectively pushing back the likely timing of any rate cuts until later in the year, a sharp reversal from projections just weeks earlier.
The latest Consumer Price Index showed a 3.5% year‑on‑year rise, above economist forecasts and marking a third consecutive month of acceleration away from the Fed’s goal. The figures confirm that price pressures remain stubborn, leaving policymakers little room to ease financial conditions.
Stronger dollar, tighter conditions weigh on risk appetite
An environment of persistent inflation, a stronger greenback and delayed prospects for cheaper borrowing typically channels capital away from higher‑risk assets. For market participants operating in a backdrop of elevated volatility, this points to the potential for reduced liquidity and softer upside momentum in the weeks ahead.
Middle East tensions now reinforce, not weaken, dollar’s haven bid
Contrary to earlier hopes of easing tensions, an escalation of conflict in the Middle East has reinforced the dollar’s role as the dominant safe‑haven asset, drawing in funds during bouts of global uncertainty.
The yen has not captured safe‑haven demand to the same extent, restrained by the wide and persistent interest‑rate gap between Japan and the United States. That differential continues to favor dollar holdings despite periodic risk‑off episodes.
USD/JPY breaks out to 34‑year high as traders eye 155.00
Against this backdrop, USD/JPY has burst through previous resistance, surging to a 34‑year high above 154.50. The breakout marks a clear technical shift from the earlier consolidation phase and confirms strong bullish momentum in the pair.
Attention is now centered on the 155.00 level, a key psychological barrier. Japanese officials have signaled that a move toward or through this zone could invite direct intervention in the currency market, making it a critical level for traders to watch in the near term.
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