The US dollar has reached a 10-month high against other major currencies, causing the euro and sterling to drop to their lowest levels in six months and the yen to remain in intervention territory. The increase in the dollar is largely due to expectations of higher interest rates in the US. This has led to a selloff in US Treasuries, resulting in higher yields and making the dollar more attractive. The euro is expected to lose more than 3% for the quarter, marking its worst quarterly performance in a year, while sterling is on track for a quarterly loss of more than 4%.
The yen has been particularly affected by the rise in US yields, with the dollar/yen pair nearing a low not seen in 11 months. This has raised concerns among traders about possible intervention by Japanese authorities to stabilize the currency. The Bank of Japan has indicated the need to maintain loose monetary settings, but there is division regarding the timing of ending negative interest rates. Meanwhile, the Swedish krona has strengthened against the dollar and euro due to the announcement by the central bank that it would hedge part of its forex reserves to reduce risk.
Overall, the higher-for-longer US rates have driven the dollar to a 10-month high, while causing the euro and sterling to reach six-month lows. The yen remains in intervention territory due to its sensitivity to changes in US Treasury yields. The Bank of Japan is divided on ending negative interest rates, and traders are watching for signs of intervention. In contrast, the Swedish krona has strengthened against the dollar and euro as the central bank takes steps to reduce risk.
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