Rampant dollar hits new 24-year high on the yen


US dollar banknotes are shown in this image, taken Feb. 14, 2022. REUTERS/Dado Ruvic

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HONG KONG, July 11 (Reuters) – The dollar climbed to a 24-year high on the yen on Monday after strong election results from Japan’s ruling conservative coalition indicated no change in monetary policy easing, and fears of global growth helped the safe-haven dollar more broadly.

The dollar climbed to a high of 137.28 yen in morning trading, its highest since late 1998. It then rose slightly, eventually rising 0.6% to 136.93.

The dollar was also firm on the euro, which fell 0.38% to $1,0144, en route to a 20-year intraday low hit on Friday, pushing the dollar index up 0.4% to 107.3.

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“The dollar is strengthening across the board, but the dollar yen is leading the way,” said currency strategist Rodrigo Catril at National Australia Bank.

He said investors’ shift from riskier assets had supported the dollar overall, while in Japan Sunday’s election results, which indicated no change in the country’s expansionary economic policies, would weigh on the yen.

The Bank of Japan’s (BOJ) policy of holding Japanese interest rates to support the economy, coupled with rising US interest rates, has been a major factor in the Japanese currency’s recent weakness.

BOJ Governor Haruhiko Kuroda said earlier in the day that the central bank “will not hesitate to take additional monetary easing measures if necessary”.

High inflation β€” by Japanese if not global standards β€” had led to some public pressure on policymakers to change course, but Catril said that pressure had been eased by Prime Minister Fumio Kishida’s coalition led by Prime Minister Fumio Kishida’s Liberal Democratic Party (LDP). , taking her highest house seats in Sunday’s election. read more

The US 10-year yield was last at 3.087%, after rising last week.

GROWTH FEAR

Outside of Japan, fears about the global growth prospects, especially as central banks try to curb runaway inflation, drove flows to safe havens.

β€œThe (dollar) could remain expensive until the risks surrounding elevated global inflation, European energy security and China’s growth prospects are resolved,” Barclays analysts said in a note to customers.

This week’s US CPI will be an important piece of the puzzle as the Fed decides between 50 basis points and 75 basis points ahead of its July meeting.

US CPI data is expected on Wednesday and markets would likely interpret a high reading as a sign that the US Federal Reserve would need to raise interest rates even more aggressively to fight inflation.

With inflation rampant across much of the world, rate hikes are also expected this week from the Reserve Bank of New Zealand on Tuesday and the Bank of Canada on Thursday.

Energy concerns meant the euro struggled with more than just the dollar and early trading Monday stood at 0.85 pence and 139 yen, just above Friday’s levels when it hit its lowest point since late May against the US dollar. both currencies.

As a final concern for the European economy, annual maintenance will begin on Monday on the largest single pipeline carrying Russian gas to Germany. Flows are expected to stop for 10 days, but governments, markets and businesses fear the shutdown could be extended due to the war in Ukraine. read more

The other major economic event this week is China’s second-quarter GDP on Friday, with investors watching for signs of how hard the economy has been hit by the COVID-19 lockdowns.

Britain will release its second-quarter GDP data on Wednesday, but attention is more focused on the ruling Conservative party’s choice of their next leader and prime minister. read more

Sterling fell 0.38% against the stronger dollar at $1.1986 Monday morning after capping off a volatile time last week not far from where it started.

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Reporting by Alun John; Editing by Sam Holmes and Stephen Coates

Our Standards: The Thomson Reuters Trust Principles.

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