On Wednesday, the dollar edged higher from a two-week low against a bundle of major rivals but remained near a 32-year high against the yen as traders evaluated the potential of faster Federal Reserve rate hikes against the improvement in risk sentiment.
This week, as the market processed the British government’s change in fiscal policy and the Bank of England’s choice not to sell any relatively long gilts this year, the pound steadied amid its trading range. The euro was circling very near a two-week high.
The dollar last traded at 149.18 early in Wednesday’s Asian session after climbing as strong as 149.395 yen overnight, marking it the first since August 1990.
As the currency pair approaches the crucial psychological barrier of 150, traders are vigilant for the Ministry of Finance as well as the Bank of Japan to enter the market once more. About a month ago, a cross of 145 prompted the first yen-buying involvement since 1998.
Local media claimed Japanese Finance Minister Shunichi Suzuki stated on Wednesday that he was “meticulously” and “more frequently” monitoring exchange rates.
The dollar, which presently dominates as the preferred safe-haven currency, has fallen this week amid a bear rebound in global shares as a result of some encouraging earnings.
But the Fed’s fixation on high inflation—even at the risk of triggering a recession—continues to receive underpinning support from the market, which is pricing in two additional 75 basis point rises from the Fed this year.
Global bond market prospects are further clouded by the British government’s fiscal uncertainties.
The dollar index, which compares the greenback to six other currencies, including the yen, the pound, and the euro, moved up to 112.01 after overnight falling to its lowest level since October 6 at 111.76. At the end of September, it reached 114.78, a multi-decade high.
Sean Callow, the currency strategist at Sydney-based Westpac, believes that this is most likely just a brief break in the dollar’s bull run and predicts a retest of the peak in November.
Since the MOF has indeed crossed the Rubicon, there is still an intervention risk on the yen, but Callow believes that its goal is to limit the scope of speculative stance rather than to cause a persistent reversal.
Given that the BOJ is the only evolved-market central bank still adopting a negative interest rates policy, it will likely take some time to breach a figure as around as 150, but Callow said it is difficult to imagine why the pair wouldn’t move into the 150-155 range.
Sterling, meanwhile, increased 0.27% to $1.1349 after falling 0.34% in the previous session. After a Financial Times claim that the Bank of England would defer quantitative tightening on Tuesday, the currency initially gained before falling as the Bank deemed the information “inaccurate.”
The BoE announced that while it will begin selling a portion of its enormous portfolio of British government bonds on November 1st, it would not sell any longer-duration gilts this year, which have been at the heart of market turbulence following the government’s “mini-budget.”
The euro was roughly flat at $0.9857, close below the high of $0.98755 set on Tuesday and last seen on October 6.
According to a survey of economists, the European Central Bank will increase interest rates by 75 basis points on Thursday of the next week.
Following Tuesday’s shocking consumer price data, which increased expectations for further vigorous tightening by the Reserve Bank, the New Zealand dollar has continued to rise. Near the two-week peak of $0.5719 from the previous session, the currency recently traded 0.19% stronger at $0.5695.
Australian dollars were exchanged at $0.6322, gaining 0.12% on Tuesday.
