Dollar hits 10-month high as US yields spike, yen recovers from slump

This illustration, taken on July 17, 2022, features a US dollar banknote. REUTERS/Dado Ruvic/Illustration/File photo Get license rights

LONDON/SINGAPORE, Sept 26 (Reuters) – The dollar hit a 10-month high as U.S. bonds hit their highest level since October 2007. Government intervention.

Federal Reserve policymaker Neel Kashkari said Monday that given the strength of the U.S. economy, interest rates could rise again and should be kept “high for a long time” until inflation eases to 2%.

His comments helped push the yield on the 10-year U.S. Treasury — the U.S. yield that sets the tone for borrowing around the world — to 4.566% on Tuesday. Bonds move inversely with price.

Higher US yields boosted the greenback’s appeal, lifting the dollar index to 106.2, its highest since late November 2022. The index, which tracks the currency against six major peers, was last at 105.96.

The euro was last up 0.1% against the dollar at $1.0596, its lowest since March at $1.057.

“The dollar is just a steamroller, which is absolutely extraordinary,” said Joe Duckey, head of FX analysis at broker Argentex.

“It’s an exception in the US, and it’s very hard to argue with that. We continue to see strong data there.”

The dollar’s brief rally further damaged the Japanese yen, which at one point breached 149 per dollar for the first time since October 2022 to reach 149.19.

Finance Minister Shunichi Suzuki said on Tuesday that the government was “watching currency movements with a heightened sense of urgency”, prompting the yen to pare its losses against the greenback, last at 148.88 to the dollar.

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James Malcolm, head of FX strategy at UBS, said of the Japanese authorities: “Based on all the telltale signs (intervention) they have done everything they can.”

He added: “Nobody wants to believe it’s going to happen until it actually happens, which is ridiculous because (Japan) has been very consistent and very practical in doing this for decades.”

Elsewhere, the British pound fell to its lowest level since mid-March at $1.2168 and was last down 0.19% at $1.219. This follows the BoE’s decision to keep rates at 5.25% last week and a spate of poor economic data.

The pound fell to a one-year low of $1.0327 against the dollar on Tuesday, marking a year since then-prime minister Liz Truss’s disastrous budget.

The Swiss franc fell to 0.915 francs to the dollar, its lowest level since March, after the Swiss National Bank unexpectedly left interest rates on hold last week.

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Reporting by Harry Robertson in London and Tom Westbrook in Singapore; Editing by Jamie Freed, Kim Coghill and Alexander Smith

Our Standards: Thomson Reuters Trust Principles.

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