Dollar Strengthens, Yen Falls to Weakest Level
The US dollar hovered near a one-week high on Tuesday (July 21), supported by persistently high Treasury yields and geopolitical tensions in the Middle East. These conditions prompted investors to seek refuge in dollar assets.
The US dollar index held steady at around 100.93 after previously touching its highest level since July 15. The dollar's strength was supported by expectations that US interest rates could remain high for longer if inflationary pressures increased again.
US Treasury yields also provided a major support for the greenback. The 10-year bond yield hovered around 4.59%, while the 30-year yield remained above 5%. The bond market remained concerned that prolonged energy disruptions could reignite consumer inflation.
Tensions in the Middle East also maintained demand for safe havens. The ongoing conflict has led the market to assess the risks to oil prices and energy supplies as still high, thus providing continued support for the dollar.
On the other hand, the Japanese yen weakened sharply against the US dollar, hitting 162.89, its weakest level since 1986. The yen's weakening occurred because the yield gap between the US and Japan remained wide, making the dollar more attractive to investors.
As a result, the US dollar still has the potential to strengthen as long as Treasury yields remain high and geopolitical risks remain unabated. However, further yen weakness could raise concerns about potential Japanese intervention. Meanwhile, the pound sterling received support after British Prime Minister Andy Burnham pledged to maintain fiscal discipline.
Source: Newsmaker.id
