Dollar gains, yen drops near potential level of intervention

26 Oct 2023 , 09:46 AM

As investor appetite for riskier currencies decreased and Treasury yields increased, the dollar remained steady on Thursday, closing close on a one-week high. Meanwhile, the yen broke over 150 per dollar to keep markets on edge about the possibility of intervention.

Overnight, the Japanese yen hit a new one-year low of 150.32 per dollar, and it was last trading at 150.26.

On Thursday, Japanese Finance Minister Shunichi Suzuki issued a warning to investors not to dump the yen again, stating that authorities were keeping a tight eye on any transactions. He told reporters at his ministry, ‘I’m watching market moves with a sense of urgency, as before.’

Investors view the much-watched 150 level as a dangerous area where Japanese government intervention could occur. Regarding the possibility of involvement, Suzuki said nothing explicitly.

The Bank of Japan is under increasing pressure to alter its bond yield control policy next week due to the recent spike in global interest rates. According to news reports, raising the current yield cap that was established three months ago is being considered.

The Australian dollar last traded at $0.6287, down 0.35% from its 11-month low of $0.6276. Expectations of a second rate increase were fueled by an unexpectedly strong inflation figure on Wednesday.

The New Zealand dollar recently traded at $0.5788, down 0.22%, having hit an 11-month low of $0.5780.

Benchmark 10-year Treasury rates increased little, continuing their ascent towards a 16-year high of 5.0% that was momentarily surpassed on Monday. As of Thursday’s Asian hours, the 10-year yield was up 1 basis point at 4.964%.

The mood towards risk was also affected by mixed U.S. company earnings.

In the meantime, the Bank of Canada kept its benchmark overnight rate at 5.0% as anticipated, but opened the door to more rate hikes to rein in inflation. This caused the Canadian currency to weaken by 0.07% against the US dollar to 1.38 per dollar.

Ahead of an announcement of policy later in the day from the European Central Bank, the euro saw minimal movement at $1.0562.

After a 15-month rise streak, the ECB is predicted to end the run of rate increases by leaving interest rates at a record high. As it fights excessive inflation, it might talk about cutting its massive portfolio of government debt more quickly.

At its most recent price of $1.2097, sterling was down 0.09% for the day and is expected to decrease by 0.5% for the week.

The dollar was trading at 106.58 against a basket of currencies, not far from the one-week high of 106.61 that it reached on Wednesday.

The price of bitcoin dropped by 0.04% to $34,665.00 recently. The biggest cryptocurrency in the world has increased 15% this week due to rumours that an exchange-traded bitcoin fund is about to launch.

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