Hawkish Fedspeak keeps dollar king, yen slumps to 20-year low

April 15, 2022: The dollar rose to a two-decade peak against the yen and kept close to a two-year high to the euro on Friday, as more hawkish comments from Federal Reserve officials reinforced expectations for faster U.S. policy tightening.

The greenback was 0.43% higher at 126.40 yen JPY=EBS after earlier reaching 126.56 for the first time since May 2002.

The euro EUR=EBS slipped 0.14% to $1.0812, heading back toward the overnight low of $1.0785, a level unseen since April 2020.

New York Fed President John Williams said on Thursday that a half-point rate rise next month was "a very reasonable option," in a further sign that even more cautious policymakers are on board with faster monetary tightening.

By contrast, European Central Bank President Christine Lagarde said around the same time that there was no clear timeframe for when ECB rates would start to rise, adding that it could be weeks or even several months after the central bank winds down its stimulus scheme in the third quarter.

"Williams spoke openly of the need to move rates more swiftly and above neutral," further buoying the dollar, Tim Riddell, a macro strategist at Westpac wrote in a client note.

By contrast, the ECB "revealed a more dovish reaction function to the inflation news than the market had discounted," he said.

U.S. Treasury yields resumed their climb overnight, following a two-day decline, further buoying the greenback. Treasuries did not trade in Tokyo on Friday because of the Good Friday market holiday in the United States, as well as other regions including Australia, Hong Kong and the U.K.

The dollar index =USD rose 0.08% to 100.48, edging back toward the two-year high of 100.78 reached on Thursday.

For the week, it has climbed 0.64%, while the euro has dropped 0.58%.

Against the yen, the dollar has climbed 1.71%, heading for a sixth straight winning week.

Japanese Finance Minister Shunichi Suzuki warned on Tuesday that the government is watching yen moves and their impact on the economy "with a sense of urgency". Read full story

"Despite repeated verbal intervention over the past few weeks from Japanese policymakers, USD/JPY has continued to rise alongside higher U.S. yields," Goldman Sachs analysts wrote in a note.

"The odds of direct FX intervention are rising, in our view," and "should increase significantly once USD/JPY enters the 127-130 range," they said.

Meanwhile, the Australian dollar AUD=D3 hovered near a three-week low of $0.7392 reached on Wednesday, the last trading down 0.2% on the day at $0.7404.

Cryptocurrency bitcoin BTC=BTSP continued to consolidate close to a four-week low of $39,218.15 reached on Monday, last changing hands at $40,005.50.

"Bitcoin is in the danger zone as risky assets are tumbling as the bond market selloff resumes," Edward Moya, a senior market analyst at OANDA, wrote in a note.

"If it breaks below $38,000, it could get ugly real fast."

Reuters