US dollar near 38-year high versus yen

2 Jul 2024 , 11:28 AM

On Tuesday, the US dollar lingered near a nearly 38-year high against the yen, fueled by a spike in Treasury yields as investors considered the possibility of a second Donald Trump presidency.

The euro stayed stable as opposing French political groups banded together to prevent the far-right National Rally (RN) from gaining power.

Asia’s equities were mostly divided, although crude oil crept higher after a robust gain the day before.

Later in the day, U.S. Federal Reserve Chair Jerome Powell will speak at an event hosted by the European Central Bank, bringing the path of US monetary policy into focus in a week that will include several closely watched employment reports, including Tuesday’s JOLTS job openings data, a Fed favourite.

On Tuesday, the dollar was marginally firmer at 161.56 yen, close to the overnight high of 161.72 yen, last achieved in December 1986.

The currency pair is very sensitive to U.S. yields, with the benchmark 10-year Treasury yield rising about 14 basis points to 4.479% to begin the week. Analysts ascribed the shift to hopes that Trump will win the presidency, resulting in greater tariffs and government borrowing. The 10-year yield was at 4.4534% in Tokyo session.

The yen’s malaise has traders on high alert for Japanese intervention, after authorities spent approximately 9.8 trillion yen ($60.65 billion) in late April and early May, when the currency fell to 160.82 per dollar.

Meanwhile, the euro stayed firm versus the dollar, falling 0.07% to $1.0733 after reaching a high of $1.0776 on Monday for the first time since June 13.

Investors were relieved that Marine LePen’s anti-immigrant, eurosceptic RN party did not receive a higher share of the first-round vote over the weekend.

Now, the party’s opponents are banding together to strategically withdraw candidates from the second round voting on Sunday, ensuring that only the best-placed candidate, regardless of party, faces battle against the RN’s representative.

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