Dollar Prices Are Buoyed By Strong Economy And Geopolitical Tensions

(CTN News) – In Tuesday’s foreign exchange market, the US Dollar (USD) briefly reached a five-month high against the euro, while the Japanese yen declined to its lowest point since 1990. Traders are watching for possible intervention by Japan’s government at the key 155 level.

A report on retail sales for March was released on Monday that showed an increase over expectations in retail sales. As a result, the dollar has gained strength. It is believed that sticky inflation in particular will make it less likely that the Federal Reserve will begin to reduce interest rates in the near future.

According to Juan Perez, director of trading at Monex USA in Washington, “the reality is that the economy is expanding.” “In Q4 it was predicted that we would slow down in the United States, but the evidence is the opposite.”

As a result of escalating geopolitical tensions between Israel and Iran, the U.S. has received a boost as a safe-haven asset.

This weekend we are finally experiencing a major escalation in FX overseas. As a result, the dollar has become a safe haven unlike anything else in the world,” Perez explained.

The Israeli war cabinet is scheduled to meet for the third time in three days on Tuesday to determine how to respond to Iran’s first-ever direct attack, amid international pressure to avoid further escalation.

There is a speech scheduled for Fed Chair Jerome Powell later on Tuesday, which may provide insight into whether hotter-than-expected consumer price pressures and escalating Middle East tensions will affect monetary policy.

It is currently expected that there will be fewer than two 25 basis point cuts this year, down from three previously. After being expected as soon as June, the first cut is now most likely to occur in September.

As reported on Tuesday, U.S. single-family homebuilding declined in March, and while a severe shortage of previously owned houses is supporting new construction, rising mortgage rates are preventing many potential buyers from buying.

Dollar index was little changed on the day at 106.21 after earlier reaching 106.43,

Its highest level since November 2. There was a 0.16% increase in euro value to $1.0639 after earlier falling to $1.0603, its weakest since November 2.
Japanese yen strengthened by 0.23% to 154.63, after reaching a 34-year high of 154.77 earlier in the day.

In the face of a rapidly depreciating currency, traders are focused on whether Japanese monetary authorities will intervene to stabilize the currency. While officials have begun warning of a possible intervention, analysts also acknowledge that it would be difficult and costly to combat a strong bullish trend in the dollar.

The Japanese Finance Minister Shunichi Suzuki announced on Tuesday that he will closely monitor currency movements and will take “thorough measures if necessary.”

Today, we can only slow or manage depreciation, not reverse it. In reality, it’s very costly,” said Kenneth Broux, head of Societe Generale’s corporate research.

Several Asian currencies face a big challenge because U.S. bond yields keep rising, meaning they won’t have much success since they’re fighting a wider yield spread.

Australia’s dollar fell to $0.63975, its lowest since November 14.

Cryptocurrencies fell 0.58% to $62,773.00, with bitcoin down 0.58%.

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