The Japanese Yen (JPY) continued to strengthen against the US Dollar (USD) on Tuesday (5/20), marking a second straight day of gains amid broad USD weakness, although the USD/JPY pair traded flat near 144.75 during American hours. The pair dipped to an intraday low of 144.09 during early Asian trading hours before bouncing back during the European session.

In contrast, the US Dollar Index (DXY), which measures the USD against a basket of six major currencies, remained subdued for the second day as sentiment weakened following Moody's downgrade of the US credit rating from Aaa to Aa1.

Meanwhile, traders remained cautious ahead of fresh trade negotiations between Japan and the United States (US), set to resume in Washington later this week. Japanese trade minister Ryosei Akazawa is expected to attend the third round of ministerial-level talks, with US Trade Representative Jamieson Greer also scheduled to participate.

At a press conference on Tuesday, Akazawa reiterated Japan's firm stance on tariffs:

"The series of US tariffs, including reciprocal tariffs as well as tariffs on cars, auto parts, steel and aluminum, are extremely regrettable. There is no change in our stance to seek a review, meaning the elimination of those tariffs," he said.

Meanwhile, US officials have reportedly urged Japan to conclude talks soon, suggesting that reaching an early deal would give Tokyo an advantage over other countries still negotiating.

Looking ahead, market participants will be keeping a close eye on upcoming Japanese economic data, which could influence market sentiment and monetary policy expectations. The Ministry of Finance will release April trade figures on Wednesday, which will provide a snapshot of how Japan's exports and imports are holding up amid ongoing global trade tensions and weaker demand from key partners such as China and the US. Then, later on Thursday, attention will turn to Japan's inflation picture, with the April Consumer Price Index (CPI). (alg)

Source: FXstreet