Singapore On Friday, the dollar gained a lot of ground, pushing to new 32-year highs above 150 yen on predictions that the Federal Reserve will continue hiking interest rates despite the possibility of a recession.
As investors processed the news that British Prime Minister Liz Truss had resigned after only six weeks in office, the pound fell to its lowest point in a week. The risk-averse Australian and New Zealand dollars fell as well.
The Fed’s officials made little attempt to temper their hawkish rhetoric, with Philadelphia Fed president Patrick Harker declaring overnight that the central bank will continue to raise its short-term rate objective despite extremely high inflation.
Markets for money are almost completely valued for rate increases of 75 basis points in both November and December.
The dollar has everything going in its favour, according to Chris Weston, head of research at Pepperstone. “At the moment, it’s a magical currency.”
The dollar reached a high of 150.43 yen for the first time since August 1990, prior to last trading up 0.16% at 150.38.
The 10-year yield on the US dollar has risen to a more than 14-year high of 4.272% in Tokyo trading, which has a significant impact on the currency pair.
The damaged yen initially fell below the psychologically significant 150 mark late on Thursday afternoon in Tokyo, but it quickly recovered to climb rapidly from an intermediate low of 150.09 per dollar to 149.63 per dollar within a minute.
Even though there haven’t been any signs of more action since the Ministry of Finance sold dollars and bought yen last month, investors are still on high alert because Japanese officials have been threatening to act.
“To stop the yen from falling in value, (they) can no longer merely rely on individual-part intervention. You can either raise the yield curve control or take coordinated action. ” Alicia Garcia Herrero, Natixis’ senior economist for Asia and the Pacific, said this.
The U.S. dollar index, which measures the value of the dollar against a basket of six important rival currencies like the yen, British pound, and euro, increased by 0.15% to 113.10.
In the meantime, the pound fell 0.46% to $1.11875, closing in on Thursday’s low of $1.1172, its lowest level since October 14, and wiping out all traces of the momentary bounce to $1.1338 that followed Liz Truss’s departure as prime minister.
According to Carol Kong, currency strategist at Commonwealth Bank of Australia, “I think that was a knee-jerk reaction to at least a temporary lessening of UK political uncertainty” (CBA).
We’ll learn more about fiscal policy at the end of this month, but the news we heard only somewhat reduced the political uncertainty in the UK economy.
An economic policy that rocked the markets and destroyed the nation’s reputation for financial stability brought down Truss.
By choosing a new leader by October 28, the Conservative Party will elect Britain’s sixth prime minister in six years without having to call a general election for another two years.
After following the movement in sterling to an overnight high of $0.98455, the euro dropped 0.22% to $0.97645.
The Australian dollar dropped 0.41% to $0.6257, while the Kiwi dropped by around the same amount to $0.5652.