Dollar hits new high against yen on aggressive Fed bets

Pedestrians are reflected on a board displaying the Japanese yen’s exchange rate against the U.S. dollar and euro, outside a brokerage house in Tokyo, Japan, September 6, 2022. REUTERS/Kim Kyung-Hoon

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TOKYO, Sept 7 (Reuters) – The dollar hit a 24-year high against the yen and hit new highs against the Australian and New Zealand dollars on Wednesday after U.S. economic data bolstered views that the Reserve federal government will continue to aggressively tighten its policy.

The euro continued to languish not far from Tuesday’s two-decade low, well below parity, as European Union ministers prepare to meet this week to discuss the energy crisis hammering the industry and household press. Read more

An overnight report showed that the U.S. services industry unexpectedly rebounded last month, bolstering the view that the economy is not in recession and giving the Fed leeway for another 75 basis point rate hike on September 21.

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The markets currently give this scenario a 73% probability, with a 23% probability for a half-point upside.

The dollar jumped as high as 143.57 yen at the start of the Asian day, before trading 0.34% stronger than Tuesday at 143.28, as US Treasury yields also rose.

The yen is extremely sensitive to movements in long-term US rates, and the yield on the 10-year Treasury note has climbed to 3.365% in Tokyo, a level not seen since June 16.

Japanese Finance Minister Shunichi Suzuki said on Tuesday that recent market volatility has been high and authorities are watching the yen with a strong sense of urgency. Read more

But Rikiya Takebe, senior strategist at Okasan Securities, said the comments were nothing new.

Some analysts said Suzuki’s failure to reiterate the strong language used in July, when he said he was “concerned” after the yen fell past 139 to the dollar, suggested intervention in the currency market was perhaps not imminent.

“Currency interventions or policy revisions by the Bank of Japan are likely to be difficult, and it won’t be easy to keep the yen from falling,” he said.

“Foreign central banks prioritize dealing with inflation and cannot afford to worry about exchange rate fluctuations.”

Takebe added that there may be some defense at the 145 yen per dollar level, as a considerable number of knock-out triggers for domestic financial institutions’ structured bonds are likely to be stacked at this level.

The euro fell 0.2% to $0.9888 after falling to $0.9864 overnight.

The European Central Bank is expected to offer a 75 basis point rate hike on Thursday, but traders seem more focused on Russia’s decision to keep the Nord Stream 1 gas pipeline closed indefinitely.

EU energy ministers are meeting on Friday and will discuss options such as gas price caps and emergency credit lines for energy market players, according to a document seen by Reuters. Read more

The pound lost 0.3% to $1.1483, edging closer to Monday’s low of $1.1444, a level last seen in March 2020 as Britain was also embroiled in the energy crisis. , despite new Prime Minister Lizz Truss’ plans for a massive support package. Read more

The U.S. dollar index, which measures the greenback against six major peers, rose 0.08% to 110.43, remaining close to Tuesday’s 20-year high of 110.57.

Elsewhere, the Aussie fell 0.23% to $0.67165, and earlier touched $0.67105 for the first time since July 14, garnering little support from the Reserve Bank’s rate hike as scheduled for Tuesday. Read more

The New Zealand kiwi fell 0.43% to $0.6015, the lowest since May 2020.

The cryptocurrency bitcoin stood at around $18,822 after falling to $18,666 earlier for the first time since June 30. It fell more than 5% on Tuesday.

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Reporting by Kevin Buckland; Additional reporting by Daiki Iga; Editing by Ana Nicolaci da Costa

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Carol N. Valencia