Dollar closes near 32 peak against Yen despite intervention risks; the pound sterling is treading water

TOKYO, Oct 19 (Reuters) – The dollar held near a 32-year high against the yen on Wednesday, while rising from a two-week low against a basket of major peers as traders weighed the improved risk sentiment against the prospect of aggressive federal policy. Increase in reserve rates.

The pound consolidated in the middle of its trading range this week as the market digested the UK government’s fiscal policy reversal and the Bank of England’s decision not to sell longer duration gilts This year. The euro hovered near a two-week high.

The dollar hit 149.395 yen overnight for the first time since August 1990, before last trading at 149.18 at the start of Wednesday’s Asian session.

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Traders are on high alert for the MoF and Bank of Japan to re-enter the market as the currency pair pushes towards the key psychological barrier at 150. A cross of 145 about a year ago month spurred the first yen buying intervention since 1998.

Japanese Finance Minister Shunichi Suzuki said on Wednesday he was checking exchange rates “meticulously” and more frequently, local media reported. Read more

The dollar, which currently reigns as the safe-haven currency of choice, slumped this week amid the bearish rally in stocks around the world after upbeat earnings.

But underlying support continues to come from market prices for two more 75 basis point hikes from the Fed this year, as it focuses on scorching inflation, even at the risk of triggering a recession.

Fiscal uncertainty in Britain is also clouding the outlook for bond markets globally.

The dollar index – which measures the currency against six peers including the yen, the pound and the euro – rose slightly to 112.01, after falling to the lowest since October 6 at 111.76 day to day. It marked a multi-decade high at 114.78 in late September.

“We doubt this is more than a modest pause in the dollar’s bull run,” said Sean Callow, currency strategist at Westpac in Sydney, who expects the peak to retest in November.

On the yen, “the risk of intervention remains present, since the MOF has already crossed the Rubicon (but) its objective is surely only to limit the extent of speculative positioning rather than cause a sustainable reversal”, said Callow.

“A number as round as 150 will likely take some work to break in the near term,” but given the BOJ’s position as the only developed-market central bank still pursuing a negative interest rate policy, “it’s difficult to see why the pair would ‘not extend into the 150-155 zone’, added Callow.

Meanwhile, the British pound gained 0.27% to $1.1349, rebounding from a 0.34% decline in the previous session. The currency first climbed on Tuesday following a Financial Times report that the Bank of England would delay quantitative tightening, only to slide after the Bank called the article “inaccurate”. Read more

The BoE said it would start selling some of its huge stock of UK government bonds from Nov. 1, but would not sell longer-duration gilts this year that have been at the center of market volatility. market following the government’s “mini budget”. .” Read more

The euro was roughly flat at $0.9857, just below Tuesday’s high of $0.98755, a level last seen on Oct. 6.

Economists in a Reuters poll are predicting another 75 basis point rate hike from the European Central Bank on Thursday next week. Read more

The New Zealand dollar remained strong after Tuesday’s burst in consumer price data, raising expectations of continued aggressive Reserve Bank tightening. The currency last traded up 0.19% to $0.5695, close to the previous session’s two-week high of $0.5719.

The Aussie changed hands at $0.6322, up 0.12% from Tuesday.

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Reporting by Kevin Buckland; Editing by Ana Nicolaci da Costa

Our standards: The Thomson Reuters Trust Principles.

Carol N. Valencia