Sat, January 28, 2023

The Dollar Remains Steady at a 32-year High Against the Yen

U.S. dollar

The dollar rose from a two-week low on Wednesday against a basket of global rivals. It maintained near a 32-year top against the yen, supported by the likelihood of aggressive U.S. Federal Reserve interest rate increases.

After the Bank of England decided against selling any longer-duration gilts this year and denying a Financial Times story that it would delay quantitative tightening, the pound stabilized in the center of its trading range this week. The euro declined from a two-week high. The dollar recently traded at 149.305 in the Asian session after reaching a high of 149.395 yen overnight for the first time since August 1990.

As the currency pair approaches the crucial psychological barrier of 150, traders are on high alert for the Ministry of Finance and Bank of Japan to enter the market again. The first yen-buying intervention since 1998 was sparked by a cross of 145 a month earlier.

Will the Dollar Hold on to Gains Much Longer?

The dollar, now the safe-haven currency of choice, has fallen this week amid a bear rally in global shares due to some encouraging earnings. But the Fed’s fixation on high inflation, even at the risk of triggering a recession, continues to get underpinning support from the market. This is pricing in two further 75 basis point rises from the Fed this year. The British economy also clouds the prognosis for markets worldwide.

While all was going on, the pound was barely moving at $1.1318, nursing its wounds after the previous session’s loss of 0.34%. Following a Financial Times story that the Bank of England will defer quantitative tightening on Tuesday, the pound initially gained before falling as the Bank deemed the information “inaccurate.”

The Bank of England announced that while it will begin selling part of its enormous stock of British government bonds as of November 1st, it would not be selling any longer-duration gilts this year.

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