Dollar surges, on cusp of 150 yen
By Brigid Riley and Alun John
TOKYO/LONDON (Reuters) — The euro, pound and yen all traded at multi-month lows on Tuesday, with the Japanese currency on the brink of weakening past the psychological 150 per dollar level, as surging U.S. Treasury yields kept the dollar firmly on the front foot.
The euro was steady on the day at $1.0477, still around its weakest since early December 2022, after a near-1% plunge on Monday when U.S. manufacturing data came in strong and Federal Reserve officials said monetary policy would need to stay restrictive for «some time».
The combination of that and an agreement to avert a partial U.S. government shutdown sent benchmark Treasury yields to as high as 4.704% in Asian hours on Tuesday, a 16-year peak, in turn driving the dollar higher. [US/]
«There are two very powerful things that are supporting the U.S. dollar at the moment, the real rate differential is favourable to the U.S. and the U.S. economy is outperforming,» said Samy Chaar, chief economist at Lombard Odier.
'Real' interest rates, unlike nominal ones, factor in inflation which is falling faster in the United States than in Europe.
Chaar said he also thought there were technical factors driving the sell-off in U.S. Treasuries, possibly capitulation by major investors as the economic situation, in his view, did not justify yields continuing to rise.
The pound was down 0.15% at 1.2075, roughly its lowest since March, and traders were focused on the Japanese yen which was a whisker stronger on the day at 149.69 per dollar, but still around its weakest in nearly a year and just shy of the 150 per dollar level that some see as potentially pushing Japanese authorities to intervene to prop up the currency.
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