Greenback hits one-year high on Fed hike bets; Japan warns on yen
Both euro and sterling are down
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[HONG KONG] The US dollar rose to its highest in more than a year on Thursday (Jun 18) after a hawkish hold from the Federal Reserve triggered bets on rate hikes, while yen weakness drew verbal warnings from Japanese officials.
The US central bank held rates steady in a range of 3.50 to 3.75 per cent as new chair Kevin Warsh opened his era in charge with a sweeping policy review.
‘Nearly half of policymakers now expect a hike this year as inflation concerns mount.
The Fed funds futures market is fully pricing in a rate hike by October, LSEG data shows, with a strong retail sales reading further adding to hawkish bets.
The euro fell 0.3 per cent to US$1.146, while sterling was down 0.54 per cent at US$1.322, both at their lowest in more than two months.
The dollar index, which measures the greenback against a basket of currencies including the yen, euro and sterling, rose 0.36 per cent to 100.71, the highest since May 2025.
It surged 0.85 per cent the previous session, its biggest single-day jump in over three months.
“The Fed’s hawkish policy update is threatening to trigger a bullish break out for the US dollar,” said Lee Hardman, senior currency analyst at MUFG.
“The US dollar has derived support from the sharp adjustment higher for short-term US rates... more than offsetting the dampening impact from the US-Iran deal announcement over the weekend.”
Oil prices eased on Thursday after the US and Iran signed an interim agreement that would end the Iran war, reopen the Strait of Hormuz and waive US sanctions on Iranian oil, sapping some strength from the safe-haven greenback.
Yet, the fall in oil prices did little to stop the American currency rising on rate hike bets.
“Markets are examining whether the Strait of Hormuz can be reopened for free passage,” said Kimmy Tong, global market and FX strategist at Everbright Securities International.
“Until that is confirmed, sentiment favouring a stronger dollar should continue to dominate” considering the Fed’s tightening bias, she said.
The risk-sensitive Australian dollar was last down 0.1 per cent.
The Japanese yen weakened to as low as 160.90 against the greenback, its lowest since July 2024, wiping out gains made after Tokyo’s intervention on Apr 30.
The renewed slide prompted a fresh response from the government, with officials reiterating their readiness to support the currency.
“We are ready to respond appropriately to currency moves as needed at any time,” Chief Cabinet Secretary Minoru Kihara told a press conference on Thursday when asked about the yen’s decline.
Elsewhere, the Bank of England looks on course to keep interest rates unchanged at 3.75 per cent later on Thursday as it assesses what a tentative truce in the Iran war means for inflation. REUTERS
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