The dollar is set to have its strongest week against the yen in three months, as Federal Reserve Chair Jerome Powell and other officials expressed the possibility of further rate hikes. Powell and a number of policymakers stated on Thursday that they are uncertain whether interest rates are high enough to combat inflation, leading investors to interpret the comments as hawkish. This resulted in higher bond yields and an increase in the value of the dollar.
On Friday, the dollar remained close to a one-year high against the yen, reaching 151.43 yen. It is on track for a weekly gain of 1.39%, marking its largest increase since August. Tina Teng, a market analyst at CMC Markets, described Powell’s speech as “quite hawkish,” which had a significant impact on market sentiment.
The yen’s weakness has traders on alert for any signs of intervention from the Japanese government to stabilize the currency. In response to a decline in the yen last year, authorities intervened twice. Carol Kong, a currency strategist at Commonwealth Bank of Australia, stated that there is a risk of the Bank of Japan (BOJ) stepping into the forex market to strengthen the yen, although she believes that no intervention is expected unless the dollar/yen exchange rate reaches around 152.
The dollar index, which measures the currency against six major peers, remained relatively unchanged at 105.91 on Friday. It is heading towards a 0.81% weekly gain after rising by 0.39% on Thursday.
Last week, the greenback experienced a drop when the Federal Reserve maintained interest rates at 5.25% to 5.5% and weaker-than-expected economic data from the United States weighed on Treasury yields.
In other currencies, the euro remained relatively flat at $1.0669 after experiencing a 0.4% fall on Thursday. Sterling also experienced a decline, dropping by 0.1% to $1.2209. This followed data revealing that the UK economy stagnated in the third quarter.
Meanwhile, Bitcoin, the world’s largest cryptocurrency, continued to hold near an 18-month high. It was last valued at $36,499, reaching a peak of $37,978 in the previous session, the highest level since May 2022.
Additionally, the Norwegian crown experienced a significant increase following data showing that inflation in the country exceeded expectations in October. The dollar was down 0.69% against the Norwegian crown, with an exchange rate of 11.153 crowns to the dollar.
Overall, the dollar’s strength against the yen, along with the potential for further rate hikes, has had a significant impact on the currency market. Traders will continue to monitor the situation closely, particularly for any intervention from the Japanese government. The performance of other major currencies, such as the euro and sterling, has been mixed, influenced by factors including economic data and interest rate decisions. In the cryptocurrency market, Bitcoin remains strong, reaching its highest level in over a year.
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