Written by Kevin Buckland
TOKYO (Reuters) – The U.S. dollar rose to a two-decade high against its major peers on Thursday, boosted by the Federal Reserve’s hawkish interest rate expectations and after Russian President Vladimir ordered the country’s first mobilization since World War Two.
The euro, which measures the currency against a basket of six pairs including the euro, British pound and yen, rose to 111.79 for the first time since mid-2002.
The dollar rose to a new 24-year high above 145 yen after the Bank of Japan maintained ultra-low interest rates and pessimistic policy guidance on Thursday.
New gains were also recorded against the regional currencies of the Australian and New Zealand dollars abroad and the Korean won, in addition to the Singapore dollar and the Thai baht.
The Fed released new forecasts showing rates peaking at 4.6% next year with no cuts until 2024. It raised its target rate range by another 75 basis points overnight to 3.00%-3.25%, as widely expected .
The dollar was already buoyed by demand for safe-haven assets after Putin announced he would call up reservists to fight in Ukraine, and said Moscow would respond forcefully with all of its massive arsenal if the West continued what he called its “nuclear blackmail”. The conflict is there.
The two-year US Treasury yield reached a 15-year high of 4.132% in Tokyo trading.
Shinichiro Kadota, Senior FX Analyst, said: Barclays (LON 🙂 in Tokyo.
Commodity currencies were also hit hard by the deteriorating risk sentiment.
The dollar rose as high as 145.405 yen, but then bounced back sharply after the initial surprise reaction to the Bank of Japan’s announcement, and recently traded 0.31% higher at 144.53.
The result reinforced market expectations that the Bank of Japan will continue to swim against the global tide of monetary tightening, despite the weak yen.
The Bank of England also announced policy on Thursday, with markets divided on whether a 50 or 75 basis point hike is imminent.
The British pound fell to a 37-year low of $1.1221 and recently traded at $1.1240, a 0.26% decrease from the previous session.
The euro weakened to a new 20-year low of $0.9807, before trading 0.18% lower on Wednesday at $0.9820.
It fell 0.6 percent to $0.6593, after touching $0.6583, the lowest level since mid-2020. Liquidity in the currency may be weak as Australia celebrates a public holiday.