US FX WRAP: Dollar erases earlier weakness after Trump disregards Hassett as Fed Chair pick

Analysis details (20:25)

The Dollar Index was little changed with overnight losses erased as US President Trump downplayed NEC Director Hassett being the Fed Chair replacement. Hassett earlier highlighted that former Fed Governor Warsh and BlackRock's Rieder would be great Fed Chairs. Trump's comments sent both the dollar and US yields higher as Hassett is seen as the most dovish, and less friendly for Fed-independence, so participants were pricing out rate cuts from the Fed; gold was pressured as well. On the contrary, Fed's Bowman calls for continued rate cuts, noting concerns over job market  risks with policy needing to be forward-looking. DXY hit lows of 99.16 before paring to ~99.37

JPY outperformed amongst G10 FX following a couple updates. Finance Minister Katayama said FX intervention is a potential option under the US-Japan agreement and expressed readiness to take decisive action while keeping all options on the table. Further JPY strength was founded on Reuters reports that some BoJ policymakers see scope to raise interest rates as soon as April due to the inflationary effect of a weaker JPY; seen as likely to raise its FY26 economic and inflation forecasts. USD/JPY now trades around lows of 157.82. AUD and CAD underperformed in the space.

16 Jan 2026 - 20:25- ForexUS Research- Source: Newsquawk