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© Reuters.
By Peter Nurse
Investing.com – The US dollar gains positions on Wednesday while the Japanese yen weakens as rising commodity prices and expectations of a faster Federal Reserve tightening cycle continue to drive moves.
At 10:10 AM ET, the , which tracks this coin against a basket of six other majors, is up 0.1% at 98.558.
The dollar continues to gain strength following Federal Reserve Chairman Jerome Powell’s hawkish speech earlier this week in which he signaled that the central bank could raise interest rates by more than 25 basis points at upcoming meetings. monetary policy if those responsible for monetary policy consider it necessary to control inflation.
The benchmark Fed down a quarter point at its meeting last week, the first hike since December 2018, and signaled six more hikes of that caliber this year.
Benchmark US Treasury yields rose to 2.41% during trading this Wednesday in Asia, their highest level since 2019, providing support for the dollar given the widening spread of interest rates offered by the bonds of other major countries.
This difference is more evident when compared to Japan’s debt, since the yield of the amounts to a mere 0.22%, and the governor of the Bank of Japan, Haruhiko Kuroda, maintains that Tokyo must maintain the accommodative character of its monetary policy for some time.
The pair is up 0.2% to the 121.09 level, just below fresh six-year highs hit at 121.41.
Also weighing on the yen are rising commodity prices, and energy prices in particular, as Japan imports most of its energy, widening the nation’s trade deficit.
“The sharp deterioration in the trade position due to fossil fuel prices and the fact that the central bank remains reluctant to invest, leaves the door open for USD/JPY to reach 125 points in the coming weeks “, affirm the analysts of ING (AS:) in a note.
Elsewhere, the pair declines to the 1.1025 level, as US President Joe Biden will travel to Europe this Wednesday for talks with European leaders on the Russian invasion of Ukraine.
He is likely to announce plans to impose more sanctions on Moscow and pressure European leaders to boycott Russian.
The pair slips to the 1.3259 level despite UK inflation hitting a new 30-year high last month at 6.2%, at the top of the expected range. The Bank of England raised interest rates last week in an attempt to combat these high levels of inflation.
Attention will also turn today to the UK Chancellor’s Spring Statement, amid speculation that Rishi Sunak will announce support measures to help consumers suffering from the cost of living crisis.
“The fact that the UK fiscal position has some room to support the economy may provide a bit more room for the Bank of England to raise interest rates,” ING added.
The pair is down 0.1% to 0.7457, he is down 0.1% to 0.6954, both reversing recent gains, while the pair is up 0.1% to 6 .3753.
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