The dollar was headed for a second straight quarterly gain and jumped to a near four-decade high against the battered yen on Friday, with traders tentatively testing Japan’s resolve to defend its currency while awaiting crucial data on the American inflation.
Republican US presidential candidate Donald Trump launched a series of attacks, sometimes false, against President Joe Biden during their first campaign debate in Atlanta, and the dollar rose as Mr Biden stumbled on his words several times during the first exchanges.
The yen hit 161.27 per dollar, its weakest since 1986, and the euro fell 0.1 percent to $1.0693. The Australian and New Zealand dollars fell about 0.2% each, buying $0.6631 and $0.6068, respectively.
“Biden has been viewed poorly,” said Jason Wong, market strategist at BNZ in Wellington.
That increased the chances of a Trump presidency and import tariffs, he said, noting that traders were buying dollars, but the moves were fairly modest.
The dollar index hit its highest level in eight weeks at 106.13 on Wednesday and was up 1.5% for the quarter so far.
It was the second straight quarterly gain as markets have scaled back expectations for U.S. interest rate cuts over the past six months. The Federal Reserve’s preferred measure of inflation, the personal consumption expenditures (PCE) index, is due later Friday. If its annual growth slows to 2.6% in May, as economists expect, that could pave the way for cuts later in the year.
Sterling held steady at $1.2633 on Friday and remained broadly flat for the quarter as markets turned their attention to next week’s UK general election and whether Labor – if they achieve a victory overwhelming – can revive the stagnant economy.
The biggest loser of the quarter was the yen, which has lost 6% against the dollar since the end of March and more than 12% in 2024 so far.
At 172.38 per euro, the yen hit a record low against the common currency early Friday. Core inflation in the Japanese capital accelerated in June, data showed Friday, but that did little to support the yen.
Japan’s low interest rates encouraged selling of the yen for higher-yielding currencies, even as Japanese yields began to rise and authorities warned of a new round of market intervention exchanges.
On Friday, Japan replaced Masato Kanda, chief diplomat in charge of monetary issues, with Atsushi Mimura, an expert on financial regulation. Finance Minister Shunichi Suzuki said authorities were “deeply concerned” about the impact of the yen’s “rapid and unilateral” movements.
“After breaking through the 160 mark (for the dollar without intervention), what’s next? I think that’s what the markets are wondering,” said Moh Siong Sim, a strategist at Bank of Singapore. “When are they going to show their hand, if they don’t intend to do it at 160?
