NEW YORK: The dollar index gained on Tuesday but eased from a 10-month high as the upward march in Treasury yields paused, and the Japanese yen bounced from an 11-month low as Japanese officials warned about a possible intervention in the currency.
Benchmark 10-year US government bond yields have jumped to 16-year highs this month as economic data remains robust despite higher interest rates.
The Federal Reserve last Wednesday said that it may hike rates further and was likely to keep them elevated for a longer time as it battles to bring inflation closer to its 2% annual target.
“The story of September has been the jump in Treasury yields and the spillovers into the currency market,” said Adam Button, chief currency analyst at ForexLive in Toronto. “The market has expected the economic data to deteriorate and it hasn’t.”
Minneapolis Fed President Neel Kashkari said on Monday that given the surprising resilience of the US economy, the Fed probably needed to raise borrowing rates further and keep them high for some time to bring inflation back down to target.
“It’s just exceptionalism in the US, it’s very hard to argue with. We’re just seeing that consistently strong data there,” said Joe Tuckey, head of FX analysis at broker Argente, adding that “the dollar is just a steamroller”.
The dollar index was last up 0.07% on the day to 106.01. after earlier hitting 106.2, the highest since Nov. 30. The Japanese yen has suffered against the broad dollar rally, raising speculation that Japanese officials will intervene to shore up the currency.
Finance Minister Shunichi Suzuki on Tuesday said the government was “watching currency moves with a high sense of urgency”, after the yen hit an 11-month low of 149.19.
“Japanese officials had some strong words about intervention today, and that might have capped the move in dollar yen after a foray above 149,” said Button. The Japanese currency was last at 148.95.