The U.S. dollar reached a milestone by achieving its highest value against the Japanese yen since the 1990s, with a rate of 154.85 yen. This surge was attributed to investors aligning with the Federal Reserve's approach to maintaining higher interest rates, and the possible anticipation of Japan intervening to support its weakened currency.
Despite the yen hitting multiple 34-year lows this year, Japan refrained from intervening in the currency market. Experts like Calvin Tse from BNP Paribas noted that the Ministry of Finance seemed cautious about intervening as long as the primary driver of the dollar/yen exchange rate was the rising U.S. yields. However, the possibility of intervention by Japan was still on traders' minds, particularly if U.S. yields were to show signs of weakening, presenting a potential window of opportunity for action.
In the broader global market outlook, variables such as cooling tensions in the Middle East and upcoming economic indicators like the U.S. first-quarter GDP and the PCE inflation index were being closely monitored. Furthermore, the International Monetary Fund and World Bank meetings addressed concerns about the strong U.S. dollar, with countries like the U.S., Japan, and South Korea releasing a rare joint statement on the matter. This recent financial landscape has spurred a reassessment of global rate-cut timelines, with implications for Fed policy, European Central Bank, and Bank of England approaches.