Dollar Under Pressure as Fed Fails to Act on Inflation and Japan Intervenes

The US dollar has been under pressure due to the Federal Reserve's reluctance to take action on inflation, which has not met its target of 2 percent in over five years. Despite pledges to respect the inflation target, the Fed has not taken any significant steps, leading to a decline in the value of the greenback.

The situation took a turn yesterday when it was reported that Japanese officials may have intervened in the foreign exchange market. The intervention is said to be at the request of the US Treasury, which has informed banks through the New York Fed that they should stand by for potential future actions.

This move highlights a notable difference between Japan and the US in their approach to monetary policy. While Japan uses large-scale interventions and balance sheet expansion, the US prefers a more subtle approach, trying to fine-tune its policies without causing significant market disruptions.

According to Federal Reserve official Logan, the risks to inflation are to the upside, with prices trending towards the mid-2's rather than 2 percent. He also stated that modest action in the near term would reduce the likelihood of needing sharper action later on.