The dollar has reached a 10-month high as US bond yields have surged to their highest level since October 2007. The rise in yields has led to an increase in the value of the dollar, with the dollar index reaching its highest level since late November 2022. This has put the Japanese yen under pressure, with the yen falling past the 149 per dollar mark for the first time since October 2022. Investors are keeping a close eye on a meeting between political leaders and Bank of Japan officials to see if there will be intervention to support the yen.
Federal Reserve policymaker Neel Kashkari’s comments about the strength of the US economy and the need for higher interest rates have contributed to the surge in bond yields, which in turn has boosted the value of the dollar. The strong economic data from the US has made it difficult to argue against the exceptionalism of the US dollar. This rise in the dollar has also had a negative impact on the Japanese yen, which is approaching the 150 level considered to be a red line for intervention by the Japanese government.
In response to the volatility in currencies, finance minister Shunichi Suzuki has stated that authorities will not rule out any options, while Bank of Japan Governor Kazuo Ueda has emphasized the need for close coordination between the central bank and the government. There is still a 20% probability of intervention according to RBC Capital Markets’ chief currency strategist. Meanwhile, the British pound has hit its lowest level since mid-March and the Swiss franc has fallen to its lowest level since March. Overall, the surge in US bond yields has driven up the dollar and put pressure on other major currencies.