The US Dollar Climbs to a 34-Year Peak Against the Yen
The US dollar reached a new 34-year high against the Japanese yen on Monday, driven by the Federal Reserve's hawkish stance on interest rates. Investors remained cautious, however, anticipating potential intervention from Japan to support its weakening currency.
The dollar rose to 154.85 yen, its highest level since mid-1990. It later settled at 154.82 yen, close to the 155-level that could trigger intervention from Japanese authorities.
The yen's weakness comes ahead of the Bank of Japan's policy meeting on Friday. Market participants noted that Japan has refrained from intervening despite the yen hitting several 34-year lows this year.
Analysts believe that the Ministry of Finance (MOF) acknowledges the unfavorable currency fundamentals driving the dollar-yen pair higher due to rising US yields. However, they are hesitant to intervene if higher US yields remain the primary driver.
Meanwhile, the dollar index, which measures the greenback's strength against six major currencies, remained flat to slightly higher at 106.13. It retreated from five-month highs reached last week after comments from Federal Reserve officials and hotter-than-expected inflation data tempered expectations of US rate cuts.
Easing tensions in the Middle East also contributed to reduced volatility. Tehran downplayed Israel's retaliatory drone strike, suggesting an attempt to avoid regional escalation.
The market awaits key economic data releases this week, including US first-quarter GDP data on Thursday and the personal consumption price expenditures (PCE) index on Friday. A higher-than-expected PCE number could put the Fed in a difficult position, limiting its room for maneuver before the November elections.
The strong dollar was also a topic of discussion at the recent International Monetary Fund and World Bank spring meetings in Washington. The US, Japan, and South Korea issued a joint statement on the issue.
While the Fed's policy stance has led to a repricing of global rate-cut timelines, expectations for the European Central Bank (ECB) and the Bank of England (BoE) to begin cutting rates by mid-year remain intact.
The euro, heading for its biggest monthly drop against the dollar since January, remained little changed at $1.0651. Sterling slipped 0.1% to $1.2352.
In the cryptocurrency market, bitcoin rose 3.6% to $66,384 after completing its "halving" event over the weekend. This event, occurring roughly every four years, reduces the rate at which new bitcoins are created.