The US dollar rebounded today. It has made gains versus all the majors in a move which has seen the cash Dollar Index push back above 101.00, keeping it on track to post its strongest monthly performance in nearly a year. The dollar has been supported by the US Federal Reserve’s hawkish stance, which was emphasised at the last FOMC monetary policy meeting just under a fortnight ago.
This was Kevin Warsh’s first monetary policy meeting as Chair. He made it clear that the Fed’s focus was on price stability and on getting inflation back down to the Fed’s 2% target. Maximising employment, the other half of the Fed’s dual mandate, would have to take a back seat, for now.
The news led to a repricing in interest rate expectations for the rest of this year and beyond. This saw an increased probability of at least one 25-basis point rate hike before the end of 2026. This ongoing dollar strength is making life very difficult for the Japanese authorities.
Yesterday, the yen fell to its lowest level against the dollar in forty years, and it has weakened again this morning. Despite the Bank of Japan raising rates just two weeks ago, the yen continues to come under selling pressure.
Source: TN Trader
Japanese officials have reiterated their readiness to act if currency moves become excessive, and it is understood that Finance Minister Satsuki Katayama has held talks with her opposite number in the US, Treasury Secretary Scott Bessent. This hints at the likely involvement of the US on any Japanese intervention to support the yen.
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