Wednesday, 9 July 2025

Dollar hits five-year high vs yen as Fed rate bets lift U.S. yields

The U.S. dollar reached its strongest level in nearly five years against the Japanese yen on Tuesday, lifted by a jump in Treasury yields as traders bet on an early Federal Reserve interest rate hike despite surging COVID-19 cases.

The greenback rose as high as 115.815 yen for the first time since Jan. 11, 2017, as long-term Treasury yields leapt 12.5 basis points overnight to touch 1.6420% for the first time since Nov. 24.

Money markets have fully priced in a first U.S. rate increase by May, and two more by the end of 2022.

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The dollar index, which measures the currency against the yen and five other major peers, held close to the one-week high of 96.328 reached on Monday.

The euro traded at $1.1302, lifting off the one-week low of $1.12795 from overnight.

Sterling slipped to $1.34685, falling back toward the overnight trough of $1.3431, a level not seen since Nov. 29.

The Australian dollar hovered close to a near two-week low of $0.7184 reached in the previous session.

For dollar-yen, “assuming that U.S. yields remain elevated, there is nothing on the charts to stop a rally to 118.00 in the coming weeks,” he said.

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