Dollar Down but Near Two-Decade High Against Yen, BOJ Continues

By Gina Lee

Investing.com – The dollar was down on Tuesday morning in Asia, hitting a fresh two-decade peak against the yen. U.S. Federal Reserve policymakers pushed for sizeable interest rate hikes, and the Bank of Japan (BOJ) maintained its dovish stance as it intervened in the market again.

The that tracks the greenback against a basket of other currencies was down 0.25% to 100.715 by 12:26 AM ET (4:26 AM GMT). The index earlier matched Tuesday’s high of 101.03, a level last seen in March 2020.

The pair was down 0.28% to 128.54 after the greenback touched 129.43 yen for the first time since April 2002.

The pair was up 0.61% to 0.7415 and the pair was up 0.39% to 0.6762.

The pair inched up 0.07% to 6.3979, with the yuan hitting its weakest level since October 2021. The surprised markets by keeping its unchanged earlier in the day, keeping the one-year LPR at 3.7% and the five-year LPR at 4.6%.

The pair was up 0.34% to 1.3040.

Minneapolis Fed President Neel Kashkari, among the more dovish Fed members, said on Tuesday that policymakers must take even more aggressive action to bring down inflation should global supply chain disruptions persist. Kashkari’s colleague, Chicago Fed President Charles Evans, also said he is “comfortable” with a round of rate hikes in 2022 including two 50 basis-point increases, a change of position from just a month ago.

Evans, along with San Francisco Fed President Mary Daly, will also speak later in the day. Other central bank policymakers speaking throughout the week include Fed Chairman Jerome Powell and European Central Bank President Christine Lagarde, who will speak at an International Monetary Fund event on Thursday. Bank of England Governor Andrew Bailey will also speak a day later.

U.S. Treasury yields continued their upward trend in Asian trading, with yields hitting 2.981% for the first time since December 2018. Meanwhile, BOJ again offered to buy unlimited amounts of Japanese government bonds on Wednesday to rein in the rise in Japanese 10-year yields, which are uncomfortably close to the central bank’s 0.25% tolerance ceiling.

The contrasting approach to the Fed led some investors to say the yen’s rapid descent is not unjustified, even as it raises the risks for currency intervention. However, Japanese Finance Minister Shunichi Suzuki warned that the damage to the economy from a weakening currency is currently greater than the benefits from it.

“Amid the ongoing rise in U.S. Treasury yields, actions clearly speak louder than words,” with Suzuki’s comments “thus continuing to go unheeded,” National Australia Bank head of foreign exchange strategy Ray Attrill said in a note.

“Incoming Fed speak has done nothing to detract from the ongoing bond sell-off.”