The US Dollar Climbs to a 34-Year High 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 traded at 154.82 yen, just shy of 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 that Japan has refrained from intervening in the currency market 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. However, they are hesitant to intervene as long as rising US yields are the primary driver of the trend.
Meanwhile, the dollar index, which measures the greenback's value 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 market 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 pricing in Fed hikes next year.
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 expectations for the European Central Bank (ECB) and the Bank of England (BoE) to start cutting rates by mid-year remain intact, the repricing of global rate-cut timelines has impacted the euro and sterling. The euro traded little changed at $1.0651, while 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, which occurs roughly every four years, reduces the rate at which new bitcoins are created.