The dollar rose yesterday to a fresh 20-year high against the Japanese yen

• The dollar tested a two-year peak against the euro, supported by high U.S Treasury yields
• The Euro recovered some grounds, trading 0.06% higher against the dollar at $1.0787
• European currencies weren’t helped by the latest fighting in Ukraine

Forex market

The dollar surged yesterday to a 20-year high against the Japanese yen, underpinned 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 128.97 yen, the highest since May 2002. 

It was last up 1.5% at 128.94 yen. The dollar has risen 5.9% on the yen so far this month, on pace for the largest monthly percentage rise since 2016. The BOJ has done the opposite of normalization. They have dug their heels in. Japanese monetary authorities could actually intervene to strengthen the yen, but it is not about a particular level. 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. 

Economic Calendar

While Japan's core consumer price index (CPI) data, to be released on Thursday, likely rose 0.8% in March from a year earlier, faster than a 0.6% gain in February, the level is still way below the BOJ's long-held inflation target of 2%. Providing a dollar lift is the continued rise in U.S. yields. U.S. benchmark 10-year Treasury yields hit 2.93% on Tuesday, the highest since December 2018, while U.S. 10-year inflation-linked bond yields rose to -0.01%, on the cusp of turning positive for the first time in two years. 

Chicago Federal Reserve Bank President Charles Evans, who is not a voter on this year's Federal Open Market Committee, said yesterday he is "comfortable" with a round of rate hikes this year that includes two 50 basis-point increases and reaches a neutral setting by year-end, but he does not see the need for bigger hikes. Evans joins a chorus of Fed speakers who are pushing for front-loading the rate increases. The greenback rose versus the Swiss currency, the highest since June 2020.

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Euro-EUR

The single currency recovered some ground, trading 0.1% higher against the dollar. Dollar strength and euro weakness has increased inflation, made worse by the central bank’s continuing stimulus programs. The Eurozone, however, is where the most discomfort is felt because it is exacerbating inflation, in part because imports become more expensive. Overall, the EUR/USD traded with a low of 1.0768 and a high of 1.0820 before closing the day around 1.0780 in the New York session.

Japanese Yen-JPY

The Japanese Yen fell to a 20-year low against the Dollar, underpinned 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 dollar has risen 5.9% on the yen so far this month, on pace for the largest monthly percentage rise since 2016. Overall, the USD/JPY traded with a low of 126.22 and a high of 126.98 before closing the day around 126.97 in the U.S session.

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British Pound-GBP

The British Pound dropped below $1.30 yesterday, falling for a fourth straight day against the dollar amid doubts over the Bank of England’s policy path and increased political uncertainty. Against the euro, the pound was 0.3% lower at 83.08 pence, retracing all the gains seen post the European Central Bank decision on Thursday. Overall, the GBP/USD traded with a low of 1.3002 and a high of 1.3062 before closing the day at 1.3012 in the New York session.

Canadian Dollar-CAD

The Canadian Dollar was little changed as oil prices fell and domestic data showed signs of cooling in the red-hot housing market, while bond yields rose to multi-year highs. The price of oil, one of Canada's major exports, fell in volatile trading on demand concerns after the IMF reduced economic growth forecasts and warned of higher inflation. Overall, USD/CAD traded with a low of 1.2600 and a high of 1.2641 before closing the day at 1.2609 in the New York session.

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Australian Dollar-AUD

The Australian Dollar was on the defensive yesterday as surging Treasury yields widened the U.S dollar's rate advantage and investors fretted about the state of China's coronavirus-hit economy. The Reserve Bank of Australia (RBA) is seen likely to move by just 15 basis points to 0.25% in June, and maybe reach 2% by Christmas. Overall, AUD/USD traded with a low of 0.7358 and a high of 0.7416 before closing the day at 0.7410 in the New York session.

Euro-Yen EUR/JPY

EUR/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also issuing a bullish stance. The Relative Strength Index is above 61 and lies above the neutral zone. In general, the pair has gained 0.16%.

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Sterling-Yen GBP/JPY

Currently, GBP/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 60 reading and lies above the neutral zone. On the whole, the pair has gained 0.06%.

Aussie-Yen AUD/JPY

Currently, the cross is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 76 reading and lies above the neutral region. In general, the pair has lost 0.18%.

Euro-Sterling EUR/GBP

This cross is currently trading above 14, 50 and below 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 53 and lies below the neutral region. Overall, the pair has gained 0.05%.

Sterling-Swiss GBP/CHF

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 45 and lies below the neutral region. In general, the pair has lost 0.16%.

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