Reuters reports that in Singapore, the dollar paused on Tuesday after a massive run, but it hit a new 24-year high versus the rate-sensitive Japanese yen as the gap between the United States’ steadily rising interest rates and Japan’s steadfastly low interest rates widened.
The Japanese Yen hit a low of 140.97 against the dollar and ended the day at 140.91.
yen 24 year low dollar
“After we witnessed the breach of 140 … the trend obviously was biassed in favour of yen weakness,” said Galvin Chia, an emerging markets strategist at NatWest Markets.
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“So long as (yield curve control) remains in play, and so long as interest rate divergence is in place, one of those side effects would be a lower yen.”
At the same time, the dollar fell from its record highs against the euro and the pound. Fears of a recession and the ongoing gas crisis kept both currencies from going much higher.
Despite hitting a two-decade low of $0.9876 on Monday as the reality of a winter without Russian gas set in, the euro recovered to a level of $0.99605.
Russia has permanently shut off gas to Germany via the Nord Stream 1 pipeline, initially citing an oil leak at a compressor unit then on Monday blaming western sanctions.
Vitaly Markelov, deputy chief executive of Gazprom (MCX:GAZP), told Reuters on Tuesday that deliveries will be halted until Siemens Energy fixed the broken equipment in the pipeline.
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After falling to a 2-1/2 year low of $1.1444 on Monday, sterling recovered to close up 0.54% at $1.1585. After winning a leadership ballot on Monday, British citizens now have to worry about the future of the government’s finances because of Prime Minister Liz Truss’s promises to slash taxes.
There may not be enough energy for everyone, so hard decisions must be made now, according to Michael Every, global strategist at Rabobank.
In his own words, “The options are patently unappetizing.”
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The Australian dollar, which was up 0.05% at $0.6801 before the Reserve Bank of Australia lifted its cash rate by 50 basis points, has shown minimal reaction. Additionally, the New Zealand dollar saw no change, trading at $0.6096.
The RBA board has hinted at upcoming rate hikes while stressing that it is not bound to any particular schedule.
According to Ray Attrill, head of FX strategy at National Australia Bank (OTC:NABZY), currency reactions to rate rises outside the U.S. in recent months, even if they surpass forecasts, don’t seem to have more than a brief impact.
Foreign exchange reserve requirement ratio (RRR) was lowered late Monday in China in an effort to moderate the yuan’s recent devaluation and allow banks to sell more dollars.
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The yuan was mostly unaffected by the action, trading near a two-year low of 6.9510 in offshore markets.
After reaching a high of 110.27 on Monday, the dollar index ended the day down at 109.58, a decrease of 0.02%.
