The dollar was lord of all it surveyed on Wednesday (Sep 7), at a fresh 24-year peak on the rate-sensitive yen and retesting multi-year highs on the euro and sterling as economic problems in Europe contrasted with a strong US economy.
The dollar soared as high as 144.99 yen, up 1.5 per cent, hitting the level for the first time since August 1998. It is now within a large leap of its 1998 high of 147.43.
Meanwhile sterling was at US$1.4175, down 0.7 per cent. It was holding just above the US$1.1413 level, a fall below which would be its weakest level since 1985, according to Refinitiv data.
The euro wallowed below 99 cents after dipping as low as US$0.9864 overnight, its lowest since late 2002.
"So far this week its been a dollar move being driven by rising economic hard landing risks in Europe, and the back-up in various forms of European risk premia related to the fiscal picture, stagflation, and central bank tightening into what is likely to be a recession," said Stephen Gallo, European head of FX strategy at BMO Capital Markets.
"The only question on the recession is how deep and protracted."
The European Central Bank is seen as more likely than not to deliver a massive 75 bps rate hike on Thursday, but these expectations are doing little to support the currency in the face of a battered European economy and Russia's decision to keep the key Nord Stream 1 gas pipeline shut indefinitely.
In contrast, a report overnight showed the US services industry unexpectedly picked up last month, supporting the view that the economy is not in recession and giving the Fed leeway for another 75-basis-point rate rise on Sept 21.
But the moves were most dramatic for the yen, whose tumble, even by its own recent standards, has been precipitous. The dollar has climbed 4.2 per cent from 138.96 yen just since the end of August.
Japan's currency is extremely sensitive to moves in long-term US interest rates, and the yield on the 10-year Treasury note climbed as high as 3.365 per cent in Tokyo trading, a level not seen since June 16, before retreating a little.
At these levels, speculation is also growing that Japanese authorities could intervene to prop up the currency.
Japan's top government spokesperson, Chief Cabinet Secretary Hirokazu Matsuno, told a news briefing that the administration would like to take necessary steps if "rapid, one-sided" moves in currency markets continue, ratcheting up the rhetoric.
However, many analysts see intervention as difficult.
"Foreign central banks are prioritising dealing with inflation, and cannot afford to worry about exchange rate fluctuations," said Rikiya Takebe, senior strategist at Okasan Securities.
"Currency intervention or policy revisions by the Bank of Japan are likely to be difficult, and it will not be easy to stop the yen from falling."
Elsewhere China's yuan sank to a two-year trough, closing in on the 7-per-dollar mark despite steps by authorities to stem its decline.
The onshore yuan weakened to a low of 6.9808, the softest level since August 2020, and the offshore yuan was even closer to the key level, falling as low as 6.997 per dollar.
Cryptocurrency bitcoin slumped to the lowest since June 19 at US$18,540, extending a 5 per cent tumble from Tuesday. REUTERS