The U.S. dollar reached a 10-month high on Tuesday, driven by surging U.S. bond yields. This increase in yields, which reached their highest level since October 2007, was fueled by remarks from Federal Reserve policymaker Neel Kashkari. Kashkari stated that, given the strength of the U.S. economy, interest rates should rise and be held “higher for longer” until inflation falls back down to 2%.
The 10-year U.S. Treasury yield, which serves as a benchmark for borrowing costs globally, rose to 4.566% on Tuesday. This rise in yields made the dollar more appealing, driving the dollar index to its highest level since November 2022. The index, which measures the dollar against six major currencies, was last up 0.11% at 106.07.
The euro remained relatively flat against the dollar at $1.0588, hitting its lowest level since March. Analysts attribute the dollar’s strength to consistently strong data from the U.S., leading to a “steamroller” effect.
The Japanese yen, on the other hand, continued its slide against the dollar, falling below the 149 per dollar mark for the first time since October 2022, hitting 149.19. The yen is approaching the 150 level, which analysts and traders see as a likely point for government intervention. Finance Minister Shunichi Suzuki reiterated on Monday that authorities will not rule out any options on currencies if excessive volatility persists.
The British pound also experienced a decline, reaching its lowest level since mid-March at $1.2168. This follows the Bank of England’s decision to hold interest rates at 5.25% last week and a series of negative economic data. Tuesday marks one year since the pound hit a record low of $1.0327 against the dollar after then-Prime Minister Liz Truss’s budget mishap.
The Swiss franc also fell to its lowest level since March at 0.915 to the dollar. This decline came after the Swiss National Bank unexpectedly kept interest rates unchanged last week.
Overall, the dollar’s strength is driven by rising U.S. bond yields and solid economic data, cementing its position as a strong currency. Traders and analysts will closely watch for any signs of government intervention, particularly in the case of the yen, as it approaches the 150 level.
