The US dollar showed strength on Monday, maintaining dominance over the Japanese yen which remained near a multi-decade low. However, the possibility of intervention from Japanese authorities prevented the dollar from strengthening further.
The yen was recently valued at 151.25 per dollar, having reached a four-month low of 151.86 last week, remaining close to a 32-year low of around 152 per dollar seen in 2022.
Japanese officials expressed concern about the yen's weakness, stating that it does not align with economic fundamentals. This rhetoric has intensified following the Bank of Japan's interest rate hike in March, although the decision was widely anticipated.
Currency analysts noted that the Japanese officials' verbal interventions have created strong resistance around the 152 mark for the dollar/yen pair. The fear of actual foreign exchange intervention by Japanese authorities is preventing significant upward movement in the dollar/yen exchange rate.
Global market sentiment has favored the US dollar after several central bank meetings indicated that the Federal Reserve may maintain higher interest rates compared to other major central banks. Expectations for rate cuts by the European Central Bank and the Bank of England have increased, weighing on the euro and the British pound.
In contrast, despite expectations of a Fed easing cycle, robust US economic data has cast doubt on the likelihood of three rate cuts this year. The dollar index, which measures the dollar's performance against a basket of currencies, experienced a slight increase.
Meanwhile, the Australian and New Zealand dollars have faced pressure due to a decline in the Chinese yuan. Both currencies are often considered proxies for the yuan. Market concerns about further monetary easing in China have contributed to the yuan's weakening.
Overall, the US dollar remains resilient in the face of global currency fluctuations, supported by expectations of a prolonged period of higher interest rates compared to other major economies.
Paraphrasing text from "Investing" all rights reserved by the original author.
