The US dollar strengthened especially after the Yen fell sharply. Whereas before, the Japanese currency was a favorite haven amid fears of the Coronavirus outbreak. At the time of writing, USD / JPY is trading at 111.61, the highest level since April 2019.

However, in general, the Yen is not the only currency to fall this afternoon. Most major currencies are outperformed against the US Dollar. The Australian Dollar has weakened even though Australia's Employment Change has improved. Two issues are suspected of catapulting the US Dollar

China reports that today, cases of viral infections have decreased. Two elderly people who were quarantined on a ship in Tokyo became the last case of death due to Corona so far. Even so, health experts still caution that the virus may still spread easily.

Several Fed officials believe that current interest rates can be maintained for some time to come. The statement came amid market expectations of another one or two more interest rate cuts this year.

Interest Rates Stay Maintained in Decisions

In a meeting that was held on January 28-29, the Fed decided to keep interest rates in the range of 1.5 percent - 1.75 percent. Following the decision, the FOMC committee said that the economic outlook has strengthened compared to forecasts in December 2019.

US central bank officials also made some statements about the potential danger to the economy, caused by the Coronavirus outbreak. Nevertheless, the Corona issue is likely to only be discussed at the FOMC last month.

"They expect economic growth to continue at a moderate pace, supported by accommodative monetary policy and financial conditions," wrote the FOMC minutes. "Also, some trade uncertainties have diminished in recent times, and there are also signs of stabilization in global growth. Even so, there are still uncertainties in Outlook, including due to the Coronavirus outbreak."

In a report on Wednesday (19 / February), the Japanese government is expected to maintain its assessment of current economic conditions in a monthly report that will be published on Thursday (20 / February). This is quite surprising, given the latest GDP data showing that the Japanese economy was facing a risk of recession in the first quarter of 2020.

Japan Optimistic, Taxes Raised by the Government

The optimistic view of the Japanese government amid the threat of recession is not without reason. Because the decline in consumer consumption due to tax increases in October last year is believed to be temporary.

On the other hand, the government's move to raise taxes from 8 percent to 10 percent is believed to drive wage increases, inflation, and household income in the medium term. An official who did not want to be named said that "The monthly report which will be published on Thursday reveals the government will make a little change in language to describe the current economic conditions, which is recovering moderately amid the weakness of the export sector."

The highly optimistic attitude of the Japanese government is, of course, contrary to the views of most economists, who assume that the country with the third-largest economy in the world is likely to contract again in the first quarter of this year.

The tourism sector which has been a savior of the Japanese economy is expected to be affected by the Coronavirus outbreak. In addition to the tourism sector, the pandemic also risks hitting the trade supply chain which had previously been weakened due to the US-China trade war.

The pair USD / JPY is at the level of 110.04 or strengthened 0.15 percent from the daily Open price in Asian trading today. Against a backdrop of strong US economic data, the US Dollar is unlikely to be corrected from its current position against the Yen.