A US dollar banknote is shown in this illustration from July 17, 2022. Portal/Dado Ruvic/Illustration/File Photo Acquire License Rights
LONDON/SINGAPORE, Sept 26 (Portal) – The dollar rose to a new 10-month high on Tuesday as U.S. bond yields rose to their highest since October 2007, while the Japanese yen continued its decline, prompting traders drew attention to signs of crisis and government intervention.
Federal Reserve policymaker Neel Kashkari said Monday that given the strength of the U.S. economy, interest rates are likely to rise again and should be kept higher “for longer” until inflation falls back to 2%.
His comments helped push the yield on the 10-year U.S. Treasury note – the benchmark U.S. yield that sets the tone for borrowing costs around the world – to 4.566% on Tuesday. Bond yields move in the opposite direction to prices.
Higher U.S. yields added to the greenback’s appeal, pushing the dollar index to 106.2, its highest level since late November 2022. The index, which tracks the currency against six major peers, was last up 0.11% 106.07.
The euro was last roughly flat against the dollar at $1.0588, after hitting its lowest level since March at $1.057.
“The dollar is just a steamroller, it’s absolutely extraordinary,” said Joe Tuckey, head of foreign exchange analysis at broker Argentex.
“It is simply a state of emergency in the USA and it is difficult to contradict that. We’re just seeing consistently strong data there.”
A rally in the dollar inflicted further damage on the Japanese yen, which broke 149 per dollar for the first time since October 2022 to reach 149.19. The dollar was last up 0.12% against the yen at 149.06.
The yen is slipping toward the 150 level, which analysts and traders see as a likely red line for the Treasury, whose warnings about possible intervention have increased in recent weeks. Investors are keeping an eye on a meeting of political leaders and Bank of Japan officials on Tuesday.
Finance Minister Shunichi Suzuki said on Monday that authorities will not rule out options on currencies if excessive volatility continues, and Bank of Japan Governor Kazuo Ueda said the central bank would coordinate closely with the government on foreign exchange issues.
“Intervention risk is still elevated, and our … model suggests a probability of around 20%,” Adam Cole, chief currency strategist at RBC Capital Markets, said in a note to clients.
The British pound fell to $1.2168, its lowest level since mid-March and was last down 0.34% at $1.2171. This follows the BoE’s decision to keep interest rates at 5.25% last week and a spate of bad economic data.
Tuesday marks a year since the pound plunged to a record low of $1.0327 against the dollar following then-Prime Minister Liz Truss’ disastrous budget.
The Swiss franc also fell to 0.915 francs per dollar, its lowest level since March, after falling since the Swiss National Bank unexpectedly kept interest rates on hold last week.
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Currency bid prices at 0759 GMT
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Reporting by Harry Robertson in London and Tom Westbrook in Singapore; Edited by Jamie Freed, Kim Coghill and Alexander Smith
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