(Bloomberg) — The dollar tumbled to its weakest level in almost two months, a move amplified by a sharp rally in the yen that reverberated across global currency markets.
Most Read from Bloomberg
The Bloomberg Dollar Spot Index slumped as much as 0.4% on Wednesday to its lowest level since late May. The Japanese currency surged nearly 1.5%, amid ongoing speculation authorities could intervene again to prop it up, and after former President Donald Trump flagged the exchange rate’s weakness in an interview.
The move in dollar-yen seems to be “sending shock waves” across other dollar crosses, said Valentin Marinov, head of G-10 FX strategy at Credit Agricole.
Japanese authorities are suspected of having spent ¥3.5 trillion ($22 billion) last week to support the yen, after deploying record amounts a couple of months earlier. The currency has depreciated around 11% over the past 12 months, to its weakest level since the 1980s.
In an interview with Bloomberg Businessweek published Tuesday, Trump said the strength of the dollar has been hurting the competitiveness of US exports while also pointing to the weakness of yen and yuan, raising concerns he may move to weaken the greenback if he were to win elections this year.
“We have a big currency problem,” he said. “I would always notice they fought very hard to keep their currency low.”
Others pointed to profit taking ahead of policy decisions from the Bank of Japan and the Federal Reserve later this month. The dollar has weakened almost 2% since reaching a seven-month high at the end of June as traders piled into bets its recent run was overdone.
“Some hot-money flows seem to be squaring some of their favorite G-10 bets of the past two months ahead of the central bank meetings,” said Roberto Cobo Garcia, head of G10 FX strategy at Banco Bilbao Vizcaya Argentaria SA in Madrid.
In other exchange rates, sterling rose 0.3% to $1.3009 late in the New York session, strengthening beyond the $1.30 mark for the first time in a year, with gains earlier bolstered by data showing UK inflation remains sticky. The euro rallied to a high of $1.0948, the strongest since March, while the Swiss franc traded up more than 1% to 0.8836 per dollar.
–With assistance from Carter Johnson and Aline Oyamada.
(Updates prices, adds details on Swiss franc.)
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
