Going Short of JPY Is Boosted by Yellen’s Remark on Interest-Rate Hikes Again

When interviewed by Bloomberg, Yellen, the U.S. Treasury Secretary, indicated that the USD 4-trillion budget released by Biden would be beneficial to America even if it may increase inflation and interest rates. She noted that higher interest rates probably witnessed by the U.S. at the end would also be favorable to the American society and the Federal Reserve (Fed). This is the second time that she has mentioned interest-rate hikes, which reflects that not only Yellen herself but the whole Biden administration are more eager to increase interest rates than the Fed is. In my opinion, the urgency of hikes implied by her shows that the Biden government seems to tackle inflation but emulates the strengthening USD conducted by Obama and Clinton, two former presidents from Democratic Party, for all practical purposes.

Russian Finance Minister Anton Siluanov announced last week that USD would be ditched from the National Wealth Fund whose holdings would be shifted to EUR, CNY, and gold. At the same time, Deputy Chairmen of the Government of the Russian Federation noted that if the Biden administration continued its targeted sanctions on Russia, the latter would have chances to give up USD-based crude oil contracts and cease to take USD as the settlement currency. Since Russia has taken the lead in de-dollarising, I believe that Yellen will make more remarks conducive to USD to enhance its role as a world currency unit (WCU) and boost its trends in a bid to maintain the currencys dominance so that it will not be hit by panic selling. Therefore, please get yourself prepared as Yellen will make continuous efforts to protect the USD even impose pressure on the Fed as Trump did on his watch, aiming to make the monetary policies and comments of the Fed hawkish.

As for the important economic statistics released by the U.S. last week, those performing well include the manufacturing Purchasing Managers Index (PMI) of the Institute for Supply Management (ISM), Automatic Data Processing (ADP), the population quantity of Initial Claims (Insured Unemployment), the non-manufacturing PMI of ISM and unemployment rates. However, only the performance of Non-farm Payrolls (NFP) has not been as good as expected and rebounded early last week when USD was interrupted despite the current situation of NFP better than before. Speaking of the week at the moment, the focus of the USD trend is determined by the Consumer Price Index (CPI) scheduled for June 10th. It is believed that the situation before this launch is good for the USD as traders may measure how severe the American inflation is. Under the climate of high inflation, the financial market will create the notion that the U.S. will bring interest-rate hikes forward to support the USD exchange rates unless CPI drops unexpectedly.

It is worth mentioning that investors who are positive about the upcoming market of USD can take going short of JPY as a trading tactic. The reason for this operation is that JPY has performed weaker against the backdrop of the weak USD since early April. As such, going short of JPY is the best and safe tactic at present regardless of the possible strong rally embraced by USD in the future.