Dollar Hits One-Year High Versus Yen As Inflation Worries Lift Yields

FILE PHOTO: A picture illustration shows U.S. 100 dollar bank notes taken in Tokyo August 2, 2011. REUTERS/Yuriko Nakao

TOKYO ⸺ The dollar climbed to a one-year high against the yen on Tuesday amid a spike in Treasury yields, as accelerating vaccinations and massive stimulus in the U.S. stoked inflation concerns.

The safe-haven greenback also found support as investors fretted about the potential fallout from the collapse of a hedge fund, identified as Archegos Capital, although those jitters had eased as the Asian trading day got underway.

Bitcoin pushed back above $58,000 overnight after Visa Inc said it would allow the use of cryptocurrencies to settle transactions on its payment network.

The dollar rose as high as 109.89 yen in Asia on Tuesday, a level not seen since March of last year. It’s on track for the best month since late 2016, with the end of Japan’s fiscal year this month driving up dollar demand as companies seek to square their books.

The euro languished near the 4-1/2-month low of $1.1763 reached on Monday, on course to fall by the most this month since mid-2019.

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Tougher coronavirus curbs in France and Germany have dimmed the short-term outlook for the European economy, while a widening spread between U.S. and German bond yields are adding pressure on the single currency.

Higher yields make a currency more attractive as an investment.

The dollar index hovered near a 4-1/2-month high of 92.964 reached on Monday.

The monthly U.S. non-farm payrolls report will be closely watched at the end of this week, with Federal Reserve policymakers so far citing slack in the labour market for their continued lower-for-longer stance on interest rates.

“In a week when the market is feeling so optimistic about the forthcoming payrolls release, it seems very likely that the greenback will find strong support,” with the dollar index looking to test 93, Rabobank currency strategist Jane Foley wrote in a report.

However, “the market is in danger of pricing in too much inflation risk,” meaning “we see scope for the USD to soften in the months ahead,” the report said.

In cryptocurrencies, bitcoin continued its recovery from a slide to as low as $50,360 last week, as Visa’s decision became the latest sign of growing acceptance of digital currencies on both Wall Street and Main Street.

The token last traded around $57,620. It set a record high at $61,781.83 earlier this month.

Reporting by Kevin Buckland; Editing by Sam Holmes; Reuters


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