The US Dollar Soars to a 34-Year High Against the Yen
The US dollar reached a new 34-year peak against the Japanese yen on Monday, driven by the Federal Reserve's hawkish stance on interest rates. Investors remain cautious, however, as they anticipate potential intervention from Japan to support its weakening currency.
The dollar climbed to 154.85 yen, its highest level since mid-1990. It currently sits at 154.82 yen, just shy of the 155-level that could trigger intervention from Japanese authorities.
The yen's decline comes ahead of the Bank of Japan's policy meeting on Friday. Market participants are noting Japan's reluctance to intervene despite the yen hitting multiple 34-year lows this year.
Analysts believe that the Ministry of Finance (MOF) acknowledges the unfavorable movement of currency fundamentals, with the dollar strengthening due to rising US yields. However, they are hesitant to intervene as long as US yields remain the primary driver of the dollar's strength.
Meanwhile, the dollar index, which measures the greenback's value against six major currencies, remained flat to slightly higher at 106.13. This follows a decline from last week's five-month highs, triggered by comments from Federal Reserve officials and hotter-than-expected inflation data.
Easing tensions in the Middle East also contributed to the reduced volatility. Tehran downplayed Israel's retaliatory drone strike, suggesting a move to prevent regional escalation.
Looking ahead, the market awaits US first-quarter gross domestic product 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, potentially leading to market expectations of Fed hikes next year.
The strong dollar was also a prominent topic at the International Monetary Fund and World Bank spring meetings in Washington. The US, Japan, and South Korea released a joint statement addressing 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 start cutting rates by mid-year remain intact.
The euro is on track for its biggest monthly drop against the dollar since January, currently trading at $1.0651. Sterling also slipped 0.1% to $1.2352.
In the cryptocurrency market, Bitcoin rose 3.6% to $66,384 following its "halving" event over the weekend. This event, which occurs roughly every four years, reduces the rate at which new bitcoins are created.