Affected by the inflow of safe haven funds, the Japanese yen rose to 150.62 against the US dollar, the highest level in two months. The market is concerned about the economic uncertainty that Trump's tariff policies may trigger, while expectations of further interest rate hikes by the Bank of Japan (BoJ) within the year also support the trend of the yen.

In addition, geopolitical factors also affect market sentiment. Trump recently referred to Ukrainian President Zelensky as a "dictator", making the prospects of negotiations between Russia and Ukraine even more uncertain, intensifying market risk aversion, and further pushing up the yen.

The US dollar index remains stable, and Federal Reserve policy remains key

The US Dollar Index (DXY) remains at a one week high around 107.15 as the market weighs the Federal Reserve's policy path. The latest minutes of the January meeting released by the Federal Reserve show that the Trump administration's tariff policy may push up inflation, making the Fed more inclined to keep interest rates unchanged to observe the development of the economy.

The minutes of the Federal Reserve meeting emphasized the committee's focus on inflation and the labor market, and given possible changes in US trade and immigration policies, there is still considerable uncertainty about the future path of inflation. "- Mantas Vanagas, Senior Economist at Westpac

At the same time, Trump announced plans to work with congressional Republicans to significantly reduce corporate and personal income taxes, which could have a long-term support effect on the US dollar. However, in the short term, the market is more concerned about the inflationary impact of tariff policies, and the cautious stance of the Federal Reserve on interest rate cuts may keep the US dollar relatively strong.

Euro weakens, pound falls

The euro against the US dollar remained relatively stable, with the latest trading near 1.0430. Previously, officials from the European Central Bank (ECB) had divergent views on inflation risks and economic growth, leading the market to adopt a wait-and-see attitude towards the prospects of the euro.

The pound has fallen from a two month high and is currently at 1.2594. Against the backdrop of sluggish economic growth in the UK, market expectations for a possible future interest rate cut by the Bank of England (BoE) have heated up, putting pressure on the pound.

Australian dollar and New Zealand dollar fluctuate due to economic data impact

The Australian dollar rose slightly by 0.07% to 0.6350 against the US dollar, following mixed reports of Australian employment data. Despite the second consecutive month of higher than expected growth in employment, the unemployment rate has still slightly increased, causing market divergence on the policy direction of the Reserve Bank of Australia (RBA).

The New Zealand dollar remains around 0.5710 with little change. The Governor of the Reserve Bank of New Zealand (RBNZ), Adrian Orr, stated that the central bank may only implement another 50 basis point rate cut in the event of a significant economic shock. This statement has made the market cautious about the policy prospects of RBNZ.

Editor's viewpoint:

In the short term, the US dollar index remains strong, mainly supported by the cautious policy stance of the Federal Reserve, global economic uncertainty, and safe haven demand. The Japanese yen continues to strengthen due to the inflow of safe haven funds, while major currencies such as the euro and pound are under pressure due to the uncertain economic outlook.

However, as the Trump administration is about to announce tariff policies targeting the automotive, semiconductor, and pharmaceutical industries, the market may experience new volatility. If global trade concerns further intensify, the US dollar and Japanese yen are expected to receive more safe haven buying, while commodity currencies may come under pressure.