The US dollar stabilized on Wednesday near a six-week high as investors began to absorb the likelihood of interest rate hikes to combat inflation triggered by the war with Iran. This development pushed the Japanese yen back into the territory that prompts government intervention to support it.
اضافة اعلان
Uncertainty regarding when the war in the Middle East might end weighed heavily on market sentiment, stoking inflation fears and triggering a global sell-off in bonds, which sent the yield on the 30-year US Treasury note to its highest level since 2007.
President Donald Trump stated that the United States might be forced to strike Iran again, but indicated a desire for an agreement to end the war, which has caused market turmoil and driven energy prices higher.
In recent trading, the euro stood at $1.16025 after touching its lowest level since April 8 in the previous session. The British pound held steady at $1.34, remaining close to the six-week low it hit earlier in the week.
The Australian dollar was at $0.7105, while the New Zealand dollar traded at $0.5834, with both remaining near five-week lows.
The US Dollar Index, which measures the greenback's performance against a basket of major currencies, steadied at 99.306. The index has risen by more than 1% in May, driven by safe-haven demand and market expectations that the Federal Reserve will raise interest rates by the end of the year.
The CME Group’s FedWatch Tool showed that traders now see a 50% chance of a rate hike in December—a complete reversal from pre-war expectations of two rate cuts. Investor focus will shift to the minutes of the Federal Reserve's previous meeting, scheduled for release later today.
The fragile ceasefire agreed upon by Iran and the United States in April has largely held, but markets remain anxious as the Strait of Hormuz remains effectively closed.
Brent crude futures hovered at $110 per barrel, significantly higher than levels recorded before the war began on February 28.
Prospects of higher interest rates cast a shadow over struggling emerging market currencies, with both the Indian rupee and the Indonesian rupiah falling further on Wednesday to hit all-time lows.
The strengthening US currency pushed the yen back toward the 160 per dollar mark—a level that prompted Japanese officials last month to intervene in the foreign exchange market for the first time in nearly two years.
Sources stated that Tokyo intervened multiple times in late April and early May to halt the yen's decline, but the Japanese currency's rebound was short-lived.
The yen edged up slightly to 158.93 against the dollar as investors assessed comments from US Treasury Secretary Scott Bessent, which could help clear the political hurdles preventing the Bank of Japan (BOJ) from raising interest rates next month.
Bessent said on Tuesday he was confident BOJ Governor Kazuo Ueda would do "what he needs to do" if granted sufficient autonomy by the Japanese government, signaling Washington’s desire for the central bank to hike interest rates again.
Reuters
