By Gina Lee

Investing.com – The dollar was down on Wednesday morning in Asia. The Japanese yen dropped to an almost five-year low against US currency. Other crosses saw losses as investors placed bets that Bank of Japan would lose ground to its counterparts when it tightened monetary policy in order to reduce high inflation.

By 10:17 ET (03:17 GMT), the that monitors the greenback against other currencies had fallen 0.04% (0:17 GMT)

It fell by 0.18%, to 115.93

Both the pair lost 0.13% at 0.7229, and both were down 0.221% at 0.6798.

At 6.3723 the pair was stable, but it dropped 0.02% at 1.3529.

The five-year low for the yen of 116.35 was reached on Tuesday. It also fell through its 200 day moving average to a two month low of 131.35 per euro. While trading at 131.66 per euro in the earlier session, it fell more than six years to the Swiss franc as well as seven weeks to the Australian dollar.

Andrew Ticehurst, Nomura’s economist, stated that the sharply increased COVID-19 cases in America and China seem to have a primary purpose of boosting supply chain concerns and fear of rising inflation in the U.S. rather than boosting growth.

The U.S. Treasury yields saw a dramatic jump during the initial trading days in 2022. Additionally, the gap between Japanese and U.S. yields widened which also hurt the yen.

Meanwhile, the U.S. Federal Reserve will release the minutes from its December meeting later in the day, which will be scrutinized for clues for the central bank’s rate hikes timetable.

The U.S. employment report (including non-farm payrolls) is due to be released on Friday. Investors are still waiting for more information. Standard Chartered (OTC), analysts expect 25 basis point increases in March, June and September. This is despite Fed Funds futures indicating that investors believe in an interest rate rise by May 2022.

“Despite the rapid rally in USD/JPY pairs, I still can’t get excited over the idea of a strong USD right now,” Spectra Markets president Donnelly stated to Reuters.

The rate move has certainly caught everyone’s eye, but it is difficult to judge how much you can read into an action on the first day of the year. Is the Fed able to raise interest rates beyond a couple of times and not break everything?