Federal Reserve Chairman Jerome Powell testifies before the Senate Banking Committee hearing on March 3 on Capitol Hill in Washington. Pool Photo via AP LONDON - The dollar went up on Tuesday as Federal Reserve Chair Jerome Powell put the possibility of half-percentage interest rate hikes on the table, while the yen fell below the psychological 120 level as the Bank of Japan reiterated its support for ultra-loose monetary policy.
The euro hit a six-year low, down 1.1% to 120.81 at 1230 GMT, having lost 5% against the dollar this month, as rising U.S. yields and a deteriorating trade balance suck cash from the world's third-biggest economy.
With the euro making a five-month high of 133.30, the yen's crosses also suffered. The Japanese currency fell to an almost seven-year low against the Swiss franc.
On Tuesday, Bank of Japan Governor Haruhiko Kuroda said that Japan had to maintain ultra-loose monetary policy to protect the economy, despite hawkish overnight comments from Powell.
The Fed chief sent the U.S. yields to multi-year highs by putting the possibility of half-point rate hikes on the table.
Rising energy prices and higher U.S. Treasury yields are bad news for the Japanese yen, according to analysts at Singapore's UOB in a quarterly outlook note that lifted their year-end dollar yen forecast from 119 to 121.
Two-year, five-year, 10 year and 30 year Treasury yields all stood at their highest levels since 2019 on Tuesday, widening the gap on Japanese yields while lending the dollar broad support elsewhere.
The euro, hit by the Ukraine war and rising oil prices, fell below $1.10 in early London trading, but had recovered a bit to trade up 0.1% at $1.1032.
In 12 months, Danske Bank analysts said that they see the euro diving to $1.05 as the Fed and European Central Bank monetary policies diverge.
ECB President Christine Lagarde and Chief Economist Philip Lane are expected to give speeches later in the day.
Francois Villeroy de Galhau, an ECB policymaker, said on Tuesday that the central bank needs to look through short-term swings in energy prices and keep its focus on underlying inflation trends.
ECB Vice President Luis de Guindos said that Russia's war in Ukraine will hurt euro zone growth but the bloc is still set to expand.
British sterling went up to an almost three-week high against the dollar and a two-week high against the euro ahead of British finance minister Rishi Sunak's budget update to parliament on Wednesday.
The U.S. dollar index flattened against a basket of currencies, at 98.452.
The price of cryptocurrencies went up 4.2% to $42,902 last week, which was a three-week high.