
On Tuesday, the dollar rose by 10-month highs against a basket of significant currencies, supported by U.S. bond yields scaling 16-year peaks, while the yen pegged further into the intervention danger zone.
A combination of robust economic data, hawkish Fed rhetoric and a budget deficit to be financed by borrowing, the 10-year Treasury yield has surpassed 4.5 per cent for the first time since 2007 and up over 45 basis points in September.
rates markets are priced for a risk of another Fed hike this year, against slimmer chances for another rise in Europe, and the difference has helped prop up a dollar many had bets would quickly fall once short-term rates peaked.
As U.S. yields rose yesterday, the euro lost 0.5 percent overnight, hitting a six-month trough of $1.0575, and setting a course for its worst quarterly drop in a year, down about 3 per cent.
Sterling is also set to snap three quarters of gains, losing 3.8 per cent over the three months to September. It was down to a six-month low of $1.2195 overnight, and traded just a whisker above that level early in the Asia session.
The U.S. dollar index has reached its highest level since November, at 106.1.
In the past few weeks, more signs have emerged that central banks beyond the Fed are reaching the end of their hiking cycles.
The Swiss franc fell to its lowest since June, as the central bank surprisingly kept short-term rates on hold.
The yen has slowly and inexorably slid towards the 150-per-dollar mark as policymakers stuck with extremely-easy settings.
The psychological level is viewed as a potential red line for the finance ministry, whose warnings of possible intervention have increased in recent weeks. The Bank of Japan's political leaders and bank officials were among those who had their attention on Tuesday's meeting.
On Monday, the yen reached 148.97 to the dollar and last traded at 148.72.
The antipodean currencies have received some support from rising commodity prices, though they have been mostly sideways for the past month or so. The Aussie was steady at $0.6417 and the kiwi at $0.5962.
China's yuan is at 7.3146 in offshore trade and has been under pressure from fresh worries that the country's property market quagmire will swallow economic growth.
U.S. consumer confidence and home sales data are due later on Tuesday, with slight weakening seen on both fronts, though uncertainty could dent the dollar.
Jane Foley, Rabobank's senior FX strategist, said the firm's long-term strategy was to increase the risk of a re-evaluation.