The U.S. dollar remained resilient, hovering near a 10-month high against a basket of major currencies on Thursday. This strength of the dollar was propelled by favorable U.S. economic data and forward-looking statements from Federal Reserve officials. The U.S. dollar index, a measure of the greenback’s performance against other significant currencies, steadied at approximately 106.58 after reaching an overnight pinnacle of 106.84, marking its most robust position since November 30.
On Wednesday, Federal Reserve Bank of Minneapolis President Neel Kashkari, along with several other Federal Reserve representatives, cautioned the markets about the likelihood of further interest rate hikes due to the ongoing robustness of the U.S. economy. This tone of caution coincided with surprising strength in recent U.S. economic indicators, which have defied investor expectations of an impending slowdown.
Kyle Rodda, a senior financial market analyst , remarked, “We are probably witnessing a resurgence in economic activity,” addressing previous concerns of a potential economic recession in the United States. This resurgence has also driven U.S. yields higher, with the benchmark 10-year yields surging to a fresh peak of 4.462% overnight, marking their highest level since October 2007.
The dollar/yen pair, particularly sensitive to fluctuations in long-term U.S. Treasury yields, notably at the 10-year maturity, continued to command attention from investors. The yen recently settled at 149.48, slightly down from Wednesday’s 11-month low of 149.71 but still perilously close to the psychological threshold of 150 per dollar. This level is perceived by the markets as a potential trigger for intervention by Japanese authorities.
The Japanese yen has been further pressured by a surge in oil prices, which reached their highest settlement in 2023 on Wednesday, driven by a significant drop in U.S. crude stocks and concerns over global supply shortages.
In other currency developments, the euro recovered slightly from Wednesday’s low of $1.04880, its lowest level since January 6, while the British pound held just above its lowest point since March 17. The Australian dollar also felt the impact of higher U.S. interest rates, hovering near $0.6357 against the greenback after briefly dipping as low as $0.63320 overnight.
Market participants eagerly await Federal Reserve Chair Jerome Powell’s upcoming remarks scheduled for later on Thursday, which will provide further insights into the future trajectory of U.S. monetary policy. Additionally, Australian retail data, set to be released later today, will be closely scrutinized by investors.
