The dollar surged past 152 yen for the first time since late July on Wednesday, pushing the euro to its lowest level in over three months, as investors brace for the Federal Reserve to hold off on rate cuts and contemplate the potential impact of a Trump election victory.
The U.S. currency rose 1.1% against the yen, reaching 152.82, its highest point since July 31, when the Bank of Japan (BoJ) raised interest rates to their highest level since 2007. The yen’s weakness also affected other currency pairs, with the euro up 0.95% against the yen at 164.7, and the British pound up 1.06% at 198.19 yen.
“The yen has been particularly sensitive to U.S. yield movements this year, driving the dollar/yen pair higher,” said Roberto Cobo, head of G10 FX strategy at BBVA. He also noted that Japan’s upcoming general election on October 27 and uncertainty surrounding the BoJ’s next rate move have contributed to market instability.
Meanwhile, the yield on the benchmark U.S. 10-year Treasury note reached 4.24%, its highest level since July. Markets are now pricing in a 91% chance of a smaller-than-expected quarter-basis-point cut in November, compared to earlier predictions of more aggressive rate reductions.
The dollar’s strength has also weighed heavily on the euro, which fell 0.2% to $1.07770, its lowest since July 3. Weak economic data and expectations of further rate cuts from the European Central Bank have compounded the euro’s decline. Discussions among ECB policymakers about potentially lowering interest rates have raised concerns about the region’s economic trajectory.
