Muristek
Banknotes of Euro, Hong Kong dollar, US dollar, Japanese yen, British pound and Chinese 100 yuan are seen in this picture illustration in Beijing January 21, 2016. — Reuters pic
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LONDON, March 22 — The dollar rose today as Federal Reserve Chair Jerome Powell put the possibility of 50 basis point rate hikes on the table, while the yen fell below the psychological 120 level as the Bank of Japan reiterated its support for ultra-loose monetary policy.
The euro was also under pressure, sliding to an almost one-week low versus the dollar.
The yen hit a six-year low of 120.50, down 0.8 per cent on the day, having lost more than 4 per cent against the dollar this month, as leaping US yields and a deteriorating trade balance suck cash from the world’s third-biggest economy.
Yen crosses also suffered, with the euro making a five-week high of 132.41. The Japanese currency slumped to an almost seven year low against the Swiss franc.
Japan must maintain ultra-loose monetary policy lest inflation hurt the economy, Bank of Japan Governor Haruhiko Kuroda said today — contrasting with hawkish overnight comments from Fed’s Powell.
Powell sent US yields to multi-year highs by putting the possibility of 50 basis point (bp) rate hikes on the table.
“Rising energy prices and higher U.S Treasury yields are both bad news for the Japanese yen,” said analysts at Singapore’s UOB in a quarterly outlook note that lifted their year-end dollar/yen forecast from 119 to 121.
Two-year, five-year, 10-year and 30-year Treasury yields all stood at their highest since 2019 today, widening the gap on Japanese yields while lending the dollar broad support elsewhere. US/
The euro, hit by the Ukraine war and rising oil prices, fell below US$1.10 in early London trading, but had recovered a tad to trade down 0.1 per cent at US$1.1005 by 0900 GMT.
European Union foreign ministers are split on whether to join the United States in sanctioning Russian oil, with some countries including Germany arguing the bloc is too dependent on Russia’s fossil fuels.
European Central Bank President Christine Lagarde and Chief Economist Philip Lane are expected to give speeches later in the day.
Danske Bank analysts said they see the euro diving to US$1.05 in 12 months as Fed and ECB monetary policies diverge.
The US dollar index rose 0.15 per cent to 98.651.
Cryptocurrencies were bid yesterday, with bitcoin jumping to a three-week high. It was last up 3.3 per cent to US$42,528. — Reuters