The Japanese yen rose broadly in the Asian market on Tuesday against a basket of global currencies, resuming strong gains against the US dollar, as safe-haven buying of the yen accelerated amid rising concerns over the stability of the Federal Reserve, the world’s largest central bank.

US President Donald Trump announced the dismissal of a Federal Reserve board member, in an unprecedented step that undermines confidence in the central bank’s independence and US assets.

Following more hawkish comments from Bank of Japan Governor Kazuo Ueda at the annual Jackson Hole Economic Symposium, expectations increased that the central bank will resume policy normalization soon. Investors are awaiting more new evidence on the path of Japanese interest rates for the remainder of this year.

Price Overview

The dollar fell against the yen by more than 0.5% to 146.99¥, from the opening level of 147.77¥, recording a high of 147.88¥.

The yen ended Monday down 0.6% against the dollar, giving up a large part of Friday’s gains following cautious comments by Fed Chairman Jerome Powell at Jackson Hole.

Dismissal of Lisa Cook

President Donald Trump announced late Monday the dismissal of Lisa Cook from her position on the Federal Reserve Board, citing allegations of misconduct related to mortgage loans.

The decision to dismiss a Federal Reserve board member is unprecedented and undermines confidence in the Fed’s independence and US assets.

Trump, who lacks the legal authority to dismiss Fed board members except “for cause,” backed away from his threat to fire Fed Chair Jerome Powell, whose term expires next May.

Cook’s departure from the central bank could accelerate the president’s reshaping of the Federal Reserve Board and the Federal Open Market Committee (FOMC), which sets interest rates. Her term had been set to run until 2038.

For her part, Lisa Cook said: Trump has no authority to dismiss me and I will continue to perform my duties. She added: there is no justification for dismissal and I will not resign.

Legally, Trump’s dismissal of Cook can be challenged in federal courts, and ultimately in the Supreme Court.

Congress had restricted the president’s power to unilaterally dismiss Fed governors under the Federal Reserve Act of 1913, which states that the president may only do so “for cause.”

Japanese Interest Rates

Bank of Japan Governor Kazuo Ueda said at Jackson Hole on Saturday that wage increases are extending beyond large companies, and are likely to continue accelerating due to tightening labor market conditions.

These remarks strengthened market expectations that the BOJ will resume rate hikes soon after pausing following January’s increase. Traders currently see a rate hike at the October meeting as likely.

The pricing of a 25-basis-point BOJ rate hike at the September meeting is currently steady at around 45%.

To reprice these expectations, investors are awaiting more data on inflation, unemployment, and wages in Japan.

Outlook for the Japanese Yen

Ho Min Lee, chief macro strategist at Lombard Odier, sees the yen strengthening to 140 per dollar over a 12-month horizon, but expects interest rates to remain in a narrow range in the near term.

He said: “We assume the next rate hike by the Bank of Japan will be in January next year, not October. The bank is likely to keep real interest rates deeply negative until the end of the year, and only then consider gradual increases.”

The New Zealand dollar fell against most major currencies during Monday trading despite positive economic data.

Government data showed that New Zealand’s retail sales index rose by 0.5% in the second quarter, while analysts had expected a 0.1% increase.

Excluding volatile items such as energy and food, New Zealand’s core retail sales index rose by 0.7% in the second quarter, compared with expectations of a 0.3% decline.

As for trading, the New Zealand dollar fell against its US counterpart by 0.4% to 0.5848 as of 20:14 GMT.

Australian Dollar

The Australian dollar fell against its US counterpart by 0.2% to 0.648 as of 20:14 GMT.

US Dollar

The dollar index rose by 0.7% to 98.4 points as of 19:51 GMT, recording a high of 98.4 and a low of 97.7.

This came after remarks by Federal Reserve Chairman Jerome Powell at the Jackson Hole conference on Friday, where he hinted at an upcoming rate cut.

According to the CME FedWatch tool, markets are pricing in over an 86% chance that the Fed will cut rates by 25 basis points at the September meeting.

Later this week, Nvidia will report earnings after Wednesday’s close, followed by results from Dell and Marvell Technology.

Also due on Friday are US Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation gauge.

Gold prices held steady with a negative bias during Monday trading as the dollar rose against most major currencies and markets assessed Federal Reserve policy expectations.

This followed remarks by Fed Chairman Jerome Powell at the Jackson Hole conference on Friday, where he hinted at an upcoming rate cut.

According to the CME FedWatch tool, markets are pricing in over an 86% chance that the Fed will cut rates by 25 basis points at the September meeting.

Later this week, Nvidia will release earnings after Wednesday’s close, followed by results from Dell and Marvell Technology.

Also due on Friday are US Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation gauge.

Meanwhile, the dollar index rose by 0.7% to 98.4 points as of 19:51 GMT, with a high of 98.4 and a low of 97.7.

As for trading, spot gold fell by less than 0.1% to 3,415.4 dollars an ounce as of 19:52 GMT.

The United States’ decision last week to exempt refined copper from import tariffs contrasted with its earlier move to impose steep duties on aluminum, highlighting the central role of electricity costs and the dynamics of lobbying pressure in shaping US policy.

Washington surprised the copper market by imposing taxes only on imports of semi-finished products such as wires, tubes, and sheets, while leaving refined metal untouched. Since the announcement last Wednesday, copper prices on Comex have fallen by more than 20%.

In contrast, refined aluminum shipped to the United States since June has faced a 50% tariff, as domestic producers contend with higher electricity costs compared to copper producers.

Tariffs on metal production fall under broader US efforts to revive domestic smelting capacity and reduce reliance on imports.

Century Aluminum was among the strongest advocates of these duties, arguing they are essential to protect what remains of America’s aluminum smelting industry. The company said in a June statement: “Century Aluminum applauds President Trump’s steadfast defense of domestic production of critical metals through raising aluminum tariffs to 50%.”

The exemption of refined copper, however, reflects its importance to US industry and the influence of the copper sector, including Freeport-McMoRan, which warned earlier this year that a global trade war could damage US copper production.

The company told the US government in a memo: “A global trade war could lead to slower economic growth... slower growth in the United States or globally would negatively impact copper prices, which could threaten the sustainability of the domestic copper industry due to its high cost structure.”

For aluminum, the main argument in favor of US tariffs relates to the share of energy in smelting costs. Macquarie estimates that energy represents about 50% of the cost of producing primary aluminum, compared with 30% for copper.

Macquarie analyst Marcus Garvey said: “There is no economic justification for building any new aluminum smelting capacity without significant intervention. Even with intervention, it may not be enough.”

Analysts note that one of the biggest challenges for potential investors in US aluminum smelting is the difficulty of securing long-term power purchase contracts at competitive rates, especially given higher energy costs in the United States compared to producing countries such as the UAE, Bahrain, and the world’s largest producer, China.

High electricity costs are the main reason the number of active smelters in the United States has fallen to just four today, compared with 23 in 1995.

According to US Geological Survey (USGS) data, US primary aluminum production totaled 3.35 million metric tons in 1995, fell to 1.6 million tons in 2015, and declined further to just 670,000 tons last year.