The dollar soared to a 10-month high on Tuesday as U.S. bond rates reached their highest level since October 2007, while the Japanese yen rebounded from an early fall as traders watched for government intervention.
On Monday, Federal Reserve policymaker Neel Kashkari stated that given the strength of the U.S. economy, interest rates should increase again and be “higher for longer” until inflation falls below 2%.
His comments pushed Tuesday’s 10-year U.S. Treasury yield to 4.566%, setting the global borrowing cost benchmark. Prices inversely affect bond yields.
Higher U.S. rates drove the dollar index to 106.2, its highest level since late November 2022. The currency index versus six main peers rose marginally to 105.96.
The euro touched its lowest since March at $1.057 early in the day and rose 0.1% to $1.0596.
“The dollar is just a steamroller, it’s absolutely extraordinary,” said Argentex FX analyst Joe Tuckey.
“U.S. exceptionalism is hard to dispute. The data is consistently strong.”
The brief dollar surge hurt the Japanese yen, which dipped below 149 per dollar for the first time since October 2022, hitting 149.19.
On Tuesday, Finance Minister Shunichi Suzuki stated the government is “watching currency moves with a high sense of urgency,” prompting the yen to recover to 148.88 per dollar.
According to UBS FX strategy head James Malcolm, Japanese policymakers have “done everything they possibly can” regarding intervention marks.
He said, “No one wants to believe it’s going to happen until it does, which is absurd because (Japan is) the most consistent and practised over decades at doing this.”
Meanwhile, the British pound fell to its lowest level since mid-March at $1.2168 and was down 0.19% at $1.219. It follows last week’s BoE rate hold at 5.25% and poor economic indicators.
A year ago, Prime Minister Liz Truss’s catastrophic budget sent the pound to a record low of $1.0327 versus the dollar.
The Swiss franc plummeted to its lowest since March at 0.915 francs to the dollar after the Swiss National Bank surprisingly held interest rates last week.
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