The US dollar jumped to a nearly 20 -year high against the yen following aggressive tightening from the Federal Reserve. The US dollar surged to 126.32 yen, the strongest level since June 2002, up 0.3%.
The US dollar index, which measures the US dollar against six major currencies, has strengthened to a trading level of 100.52, the highest level since May 2020. So far, the US dollar has gained almost 3% and is on track for the next rise.
Bank of Japan Governor Haruhiko Kuroda on Wednesday noted that the recent rise in inflation was driven by higher import costs and it could hurt the economy, underscoring the central bank’s determination to maintain a very loose monetary policy.
Also today, U.S. producer price index data in March jumped to the highest level of 11.2% since November 2010. This reinforced market expectations that the Fed will raise interest rates by half a percentage point at next month’s policy meeting.
According to Juan Perez, director of trade, at Monex USA in Washington, there are ample signs of inflation that the Fed will continue to maintain a hawkish tone. This will lead to the strengthening of the US dollar. On the other hand Federal Reserve governor Lael Brainard noted that the central bank is still pursuing a series of interest rate hikes despite some signs of a price decline.
On the other hand, the Euro depreciated to a trading level of $ 1.0809, the lowest level against the US dollar in more than a month. Investors took a cautious stance ahead of the European Central Bank’s policy-setting meeting on Thursday.
While the market is not expecting any interest rate changes, market players will get more indications from ECB President Christine Lagarde on the ECB’s follow -up action.
Finally the euro is likely to remain affected by the ongoing Russia-Ukraine conflict. The war, now in its second month, has increased the cost of petrol and has led to a spike in food prices globally.
