US dollar touches 24 year high against the Japanese Yen

22 Sept 2022 , 03:52 PM

After the Bank of Japan maintained its ultra-easing stimulus on Thursday, just hours after the Federal Reserve shocked the markets with hawkish interest-rate projections, the U.S. dollar soared to a fresh 24-year high versus the yen.

Prior to the Bank of England's policy decision later that day, the dollar had already climbed to a fresh 37-year high against the pound and to a two-decade high against the euro. Along with these regional currencies, it reached fresh highs versus the Australian and New Zealand dollars, the offshore Chinese yuan, the Korean won, the Singapore dollar, and the Thai baht.

Following the BOJ's decision to maintain negative short-term rates and keep the yield on the 10-year government bond at or near zero, the yen experienced a wild ride, confirming market expectations that Japan's central bank will continue to swim against a global tide of monetary tightening despite a weaker currency.

For the first time since August 1998, the dollar soared as high as 145.405 yen. However, it quickly fell to as low as 143.50 and then last traded at 144.75, 0.45% higher than on Wednesday. In revised forecasts released by the Fed on Wednesday, rates are expected to peak at 4.6% in 2019 with no reductions until 2024. It increased its target interest rate range by a further 75 basis points (bps) overnight, as was widely predicted, to 3.00%-3.25%.

Demand for safe-haven assets, which increased after Putin announced he would activate reserve troops to fight in Ukraine, helped to support the dollar. Putin also threatened to use all of Moscow's formidable arsenal if the West continued what he called its "nuclear blackmail" strategy regarding the conflict there.

A fresh 20-year low was reached by the euro at $0.9807 before trading 0.11% lower on Wednesday at $0.98265. Sterling hit a new low of $1.1221 a 37-year low and last traded at $1.12425, down 0.24% from the previous session.

The market presently places 80% chances on the BOE raising rates by 75 basis points, and 20% odds on a half-point increase.  After reaching $0.6583, its lowest level since mid-2020, the Australian dollar fell by 0.47% to $0.6602. Due to Australia's public holiday, currency liquidity might be low.

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