The US Dollar Climbs to a 34-Year Peak Against the Yen
The US dollar reached a fresh 34-year high against the Japanese yen on Monday, fueled 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 traded at 154.82 yen, nearing the 155 level that could trigger intervention by Japanese authorities.
The yen's weakness comes ahead of the Bank of Japan's policy meeting on Friday. Market participants noted Japan's reluctance to intervene despite the yen hitting several 34-year lows this year.
Analysts believe the Ministry of Finance (MOF) acknowledges the unfavorable currency fundamentals, with the dollar strengthening due to rising US yields. However, intervention is unlikely as long as US yields remain the primary driver of the dollar's strength.
The dollar index, which measures the greenback's value against six major currencies, remained flat to slightly higher at 106.13 in late afternoon trading. It had 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, seemingly aiming to prevent regional escalation.
This week, 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 complicate the Fed's policy path ahead of the November elections.
The strong dollar was also a topic of discussion at the IMF and World Bank spring meetings last week, leading to a joint statement from the US, Japan, and South Korea on the issue.
While expectations for the European Central Bank (ECB) and the Bank of England (BoE) to start cutting rates by mid-year remain intact, a rethink on Fed policy easing has led to a general repricing of global rate-cut timelines.
The euro was little changed at $1.0651, while sterling slipped 0.1% to $1.2352. In cryptocurrencies, bitcoin rose 3.6% to $66,384 after completing its "halving" over the weekend, which reduces the rate at which new bitcoins are created.