Dollar Scoring Fresh 20-Year High on Yen

The dollar index, which gauges the dollar versus six other currencies, climbed past 101 for the first time in more than two years. It edged 0.07% lower at 100.74, down 0.1% at 0825 GMT.

The dollar’s gains have been most striking versus the yen, climbing to its highest level of 128.32 yen against the Japanese currency after May 2002. It was last up 1.3% at 128.24 yen.

The dollar has increased 5.4% on the yen this month, its second-biggest monthly percentage increase since 2016 after 5.8%.

The euro regained some ground, trading 0.25% higher against the dollar at $1.08095, but stayed just off last week’s two-year low of $1.0756.

Interest rates are increasing

On Tuesday, the benchmark U.S. 10-year Treasury yield was just off its three-year high of 2.884% hit on Monday. Yields on 10-year U.S. inflation-linked bonds are within touching distance of rotating positive for the first time in two years.

Anticipations that the U.S. Federal Reserve will draw its monetary policy have continued to support the dollar.

U.S. inflation is “far too high,” St. Louis Federal Reserve Bank President James Bullard spoke on Monday. He repeated his case for raising interest rates to 3.5% by the end of the year.

In the meantime, the BoJ has been interfering to keep the Japanese 10-year government bonds yield at about 0% and no higher than 0.25%.

Many investors are betting that the yen has further dropped. The latest CFTC data for the week ending April 12 shows that net short yen positions are the biggest in three and a half years.

Japanese Finance Minister Shunichi Suzuki made the most apparent warning against the yen’s recent slump on Tuesday, stating the damage to the economy from a lowering currency is more significant than its benefits.