Greenback rallies to fresh one-year high against beaten-down yen

THE US dollar climbed to its highest level in over a year against the Japanese yen on Monday (Nov 13), continuing to draw support from a scaling back of expectations for US Federal Reserve interest rate cuts next year.

Japan Finance Minister Shunichi Suzuki said the government would monitor the currency market and respond appropriately. The comments had little immediate impact on the yen, which is down almost 14 per cent against the US dollar this year.

Sterling, meanwhile, inched higher after a reshuffle of key posts in the government by British Prime Minister Rishi Sunak.

The overall tone in global currency markets was generally subdued, with traders waiting for the latest US inflation numbers on Tuesday to make up their minds on whether rate cuts are likely next year.

“We’re in this pause where the (US) dollar has peaked and the US economy is slowing, but people are going to wait for confirmation,” said Societe Generale strategist Kit Juckes.

“Given the move in US Treasuries, of course the yen is not rallying yet,” he said, referring to US bond yields.

The US dollar on Monday rose to 151.88 yen, its highest level since October 2022. It was last up 0.15 per cent, having last week rallied around 1.4 per cent in the biggest weekly jump against the yen in three months.

Fed policymakers, including chair Jerome Powell, last week suggested the battle against inflation may not be over yet, prompting a scaling back of market rate cut bets that pushed up short-dated Treasury yields and supported the greenback.

The US dollar index, measuring the greenback’s value against other major currencies, was a touch firmer at around 150.80 but holding on to most of last week’s gains.

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The market showed little reaction to news late on Friday that Moody’s cut the outlook for US credit to negative from stable.

Data out of Japan on Monday, meanwhile, showed wholesale inflation slowed below 1 per cent for the first time in just over two-and-a-half-years, suggesting cost pressures that had been driving up prices were starting to fade and giving little support to the yen.

Still, markets remained alert to potential intervention from Tokyo to shore up the battered yen.

“At this point, it’s still about the pace of moves so if we move at the current pace it is manageable for Japan,” said BNY Mellon senior macro strategist Geoff Yu, talking about Japanese currency intervention risks.

“Overall, the (US) dollar environment is driving things,” he added.

The euro was a touch stronger at US$1.0684, while sterling was 0.2 per cent stronger at US$1.2254.

Britain’s currency was 0.2 per cent firmer against the euro at around 87.24 pence after news of changes to the make-up of the UK government.

Prime Minister Sunak brought back former leader David Cameron as foreign minister in a reshuffle triggered by his firing of Interior Minister Suella Braverman after her criticism of the police threatened his authority. REUTERS