The dollar rose to 146.28 yen on reports that the International Trade Court has enjoined the Trump tariffs. However, the ruling only enjoins tariffs imposed under the International Emergency Economic Powers Act (IEEPA) and does not involve tariffs made under other laws.
The administration quickly appealed, but it appears likely that there will be no significant impact, as it will likely impose tariffs under other laws, with a small chance of winning.
The market reaction was as if the Trump tariffs were all going to be overturned, but it is likely that only some of the tariffs will be overturned, not all, and given that they will be recast under other laws, it is likely that there will be no significant impact.

Just before the market closed on Friday, May 16, Moody’s lowered its rating on U.S. Treasuries one notch to Aa1 from Aaa. Moody’s explained the reason for the downgrade by saying, “While the U.S. economy and finances are strong, the fiscal deterioration has reached a point beyond repair.”
The downgrade by S&P in August 2011 and by Fitch in August 2023 had a slight downgrade of the U.S. Treasuries from AAA. The downgrade by Fitch in 2023 did not have much of an impact, but it was a hot topic of conversation.
However, if all three rating agencies downgrade, the U.S. loses its AAA rating, and the impact is likely to be felt in the future. The only alternative is Europe. The Eurodollar would be a push.

The U.S. lost its AAA credit rating, which led to a sell-off of the dollar, but this was accompanied by a buy-back, and as a result, not much of an impact remains in the market at the moment. However, the gradual deterioration of U.S. hegemony is now being felt firsthand. Talks for a ceasefire between Russia and Ukraine have also been licked by Russia, and the possibility of a ceasefire appears hopeless. Rather than a weakening of the dollar from the “Mar-a-Lago Accord,” we may be seeing a development in which the dollar weakens as if anticipating the entry of U.S. economic stagflation from the failure of tariff policy.

In Japan, super-long-term interest rates had been at record highs recently, but the 40-year bond auction ended in the books. When it was reported that the Ministry of Finance would hold a primary dealers’ meeting on June 20 to reduce the amount of ultra-long-term bonds, interest rates fell sharply, and the dollar/yen exchange rate broke through the ¥143 mark, prompting short-covering. The lack of demand for ultra-long-term JGBs is a bit surprising, but many life insurance companies are stuck with large holdings of ultra-long-term bonds that they have already purchased at high prices. In the end, even if the short-sighted measures can overcome the immediate situation, the fundamental supply-demand situation will not improve.
The logic behind this is not clear, but it is not that difficult to control ultra-long-term bonds, which are issued in small amounts to begin with, and it can be expected that the yen will eventually rise due to short-covering on such reports.
The U.S. ultra-long-term interest rate also fell below 5.00% following Japan, but will soon rise above 5% again. We would like to sell when the dollar pulls back.

The WSJ (Wall Street Journal) reported that the U.S. administration may apply Section 122 of the Trade Act and impose a 15% tariff for 150 days. This week is the first week of the month and the release of U.S. economic indicators continues. There are concerns about whether the recession and stagflation fears will become a reality, and any economic indicator that indicates a recession is likely to be met with a large reaction.
The market is likely to react sharply to any economic indicators that point to a recession. We would also like to buy the Eurodollar push.