Dollar Steady, Yen Hits Weakest Level Since 1986
The US dollar weakened slightly against the euro in trading on Thursday (July 23rd) ahead of the European Central Bank's policy decision. However, the greenback hit a new 40-year high against the Japanese yen, as investors remained focused on the escalating Middle East conflict.
The US dollar index edged down 0.08% to 101.06. Despite the limited weakness, the dollar remained supported as markets began to scale back expectations for a US interest rate cut, especially after oil prices continued to rise due to disruptions to global energy routes.
Oil prices rose for a fifth day after Houthi attacks on tankers in the Red Sea, while the US-Israel war against Iran nearly closed the Strait of Hormuz. This situation fueled concerns about energy inflation and made the dollar more attractive compared to both the euro and the yen.
The euro edged up 0.09% to US$1.1423 ahead of the ECB meeting. The European Central Bank is expected to keep interest rates on hold but leaves open the possibility of further increases if inflationary pressures from energy intensify.
On the other hand, the Japanese yen weakened again to its lowest level since December 1986, around 163.30 per US dollar. This weakening occurred despite the two-year Japanese government bond yield rising to a 31-year high, as the market still expects the Bank of Japan to move cautiously in raising interest rates.
Consequently, the US dollar still has the potential to remain strong as long as geopolitical risks and high oil prices maintain demand for safe havens. The euro could move within a limited range pending the ECB's signal, while the yen remains vulnerable to intervention if it continues to weaken above 160 per dollar. For gold, a strengthening dollar and yields could limit the rally, although the Middle East conflict continues to provide support from a safe haven perspective. (arl)
Source: Newsmaker.id
