Dollar maintains pressure on yen as it hovers near 10-month high

28 Sep 2023 , 10:38 AM

Against a basket of its counterparts, the dollar held steady near a 10-month high on Thursday, keeping the yen under pressure close to a crucial intervention zone as investors weighed encouraging U.S. economic data and new remarks from Federal Reserve officials.

Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, was one of many Fed officials to warn against further rate increases on Wednesday, noting that there was abundant evidence of the economy’s continued strength and that further tightening might be forthcoming.

Later on Thursday, Fed Chair Jerome Powell is slated to speak, providing the markets with additional hints about the direction that U.S. monetary policy may take.

The Fed policymakers’ comments come as U.S. economic data continues to shock investors with its strength, surpassing expectations.

Following a high of 106.84 overnight, the U.S. dollar index, which compares the dollar to a basket of other significant currencies, was trading at or near 106.58. This is the highest level since Nov. 30.

Overnight, U.S. benchmark 10-year rates reached a new high of 4.462%, the highest level since October 2007.

Particularly at the 10-year maturity, the dollar/yen pair is prone to being quite sensitive to changes in long-term U.S. Treasury yields.

The yen was last trading at 149.48, off Wednesday’s new 11-month low of 149.71, but still dangerously close to the psychologically important threshold of 150 per dollar, keeping investors on the lookout for indications of Japanese government intervention.

Markets interpret the 150 zone as a red line for the Japanese government that could lead to intervention, as it did last year.

The rise in oil prices, which reached their highest settlement on Wednesday in 2023 after a sharp decline in U.S. crude stocks added to concerns about a shortage of supply worldwide, has also put pressure on the value of the yen.

Sterling GBP=D3 was slightly above its lowest point since March 17 while the euro was off its low of $1.04880, reached on Wednesday, the currency’s lowest point since January 6.

The Australian dollar, which hovered around $0.6357 against the US dollar after sliding as low as $0.63320 overnight, was also being affected by higher rates in the US. The spotlight will be on Australian retail figures released later on Thursday.

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