(Adds new comment, FX table, byline, updates prices)
- Dollar gains another 1.4% against yen
- Japanese finance minister warns of risks from yen slump
- Dollar hits highest against Swiss franc since July 2020
- Aussie boosted by RBA minutes showing rate hike getting closer
The dollar rose on Tuesday to a fresh 20-year high against the Japanese yen, supported by the divergence in monetary policy between a Federal Reserve determined to keep a lid on soaring inflation and a Bank of Japan that has kept interest rates ultra-low.
The greenback hit 128.765 yen JPY= , the highest since May 2002. It was last up 1.4% at 128.74 yen. The dollar has risen 5.4% on the yen so far this month, on pace for its second-biggest monthly percentage gain since 2016 after last month's 5.8%.
"The BOJ has done the opposite of normalization. They have dug their heels in," said Richard Benson, co-chief investment officer at Millennium Global Investments in London.
But he believes Japanese monetary authorities could actually intervene to strengthen the yen, but it's not about a particular level.
"I wouldn't be surprised if the BOJ intervenes because they have a lot of dollars and they can just sell them easily," Benson noted. "There are obvious numbers to talk about and levels, but the narrative is very much about speed as opposed to level. So slow and gradual is fine."
The dollar index =USD , which measures the greenback against six other currencies, also climbed on Tuesday, rising past 101 for the first time in more than two years. It was last up 0.2% at 100.96.
Providing a dollar lift is the continued rise in U.S. yields. U.S. benchmark 10-year Treasury yields hit 2.93% US10YT=RR on Tuesday, the highest since December 2018, while U.S. 10-year inflation-linked bond yields US10YTIP=RR rose, within touching distance of turning positive for the first time in two years.
The greenback likewise rose to 0.9492 francs versus the Swiss currency, the highest since July 2020 CHF=EBS . It last changed hands at 0.9482 francs, up 0.4%.
The euro EUR= recovered some ground, trading 0.1% higher against the dollar at $1.0791, but stayed just off last week's two-year low of $1.0756.
"Policy divergence between the Fed and low-yielding central banks (European Central Bank, Bank of Japan) continues to argue in favour of USD strength," said Francesco Pesole, FX Strategist at ING.
U.S. inflation is "far too high," St. Louis Federal Reserve Bank President James Bullard said on Monday as he repeated his case for increasing interest rates to 3.5% by the end of the year.
In the meantime, the BOJ has been intervening to keep the yield on Japanese 10-year government bonds around 0% and no higher than 0.25%.
Many investors are betting the yen has further to fall. The latest CFTC data for the week ending April 12 shows net short yen positions are the largest in three and a half years.
Japanese Finance Minister Shunichi Suzuki made the most explicit warning against the yen's recent slump on Tuesday, saying the damage to the economy from a weakening currency at present is greater than the benefits from it.
The Australian dollar briefly rose to US$0.7371 from Monday's one-month low, given some support by minutes published Tuesday from the Reserve Bank of Australia's April policy meeting. The minutes suggested that the RBA was edging closer to raising interest rates for the first time in more than a decade.
======================================================== Currency bid prices at 10:54AM (1454 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 100.9200 100.8100 +0.12% 5.495% +101.0200 +100.6900 Euro/Dollar EUR=EBS $1.0793 $1.0781 +0.11% -5.06% +$1.0815 +$1.0762 Dollar/Yen JPY=EBS 128.7200 126.9850 +1.35% +11.81% +128.7650 +126.9800 Euro/Yen EURJPY= 138.93 136.92 +1.47% +6.61% +139.0600 +136.8800 Dollar/Swiss CHF=EBS 0.9486 0.9448 +0.41% +4.00% +0.9492 +0.9434 Sterling/Dollar GBP=D3 $1.2997 $1.3011 -0.10% -3.89% +$1.3040 +$1.2981 Dollar/Canadian CAD=D3 1.2618 1.2608 +0.10% -0.19% +1.2646 +1.2569 Aussie/Dollar AUD=D3 $0.7374 $0.7353 +0.29% +1.45% +$0.7400 +$0.7346 Euro/Swiss EURCHF= 1.0238 1.0184 +0.53% -1.26% +1.0242 +1.0182 Euro/Sterling EURGBP= 0.8301 0.8282 +0.23% -1.18% +0.8314 +0.8280 NZ NZD=D3 $0.6735 $0.6730 +0.09% -1.59% +$0.6764 +$0.6720 Dollar/DollarDollar/Norway NOK=D3 8.8125 8.8605 -0.51% +0.06% +8.8660 +8.7955 Euro/Norway EURNOK= 9.5125 9.5584 -0.48% -5.00% +9.5615 +9.4940 Dollar/Sweden SEK= 9.5578 9.5967 -0.29% +5.99% +9.6185 +9.5505 Euro/Sweden EURSEK= 10.3163 10.3460 -0.29% +0.80% +10.3619 +10.3140 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates https://tmsnrt.rs/2RBWI5EDollar rises vs yen https://tmsnrt.rs/3MdRjNX
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