Fed Hike Drags Euro and Yen Down

The euro was also under stress, sliding to an almost one-week low versus the dollar.

The yen struck a six-year low of 120.50, down 0.8% on the day, having lost higher than 4% versus the dollar this month, as jumping U.S. yields and a deteriorating trade balance suck cash from the world’s third-largest economy.

Yen crosses also suffered, with the euro making a five-week high of 132.41. The Japanese currency declined to a nearly seven-year low against the Swiss franc.

Japan must keep an ultra-loose monetary policy lest inflation hurt the economy. Bank of Japan Governor Haruhiko Kuroda spoke on Tuesday, contrasting with hawkish overnight comments from Fed’s Powell.

Powell sent U.S. yields to multi-year highs by setting the possibility of 50 basis point (bp) rate hikes on the table.

The U.S. Dollar Index Increased 0.15% to 98.651

Two-year, five-year, 10-year, and 30-year Treasury yields all stood at their highest after 2019 on Tuesday, broadening the gap on Japanese outcomes while lending the broad dollar support elsewhere. [U.S./]

The euro, hit by the Ukraine war and rising oil prices, dropped below $1.10 in early London trading but had recovered a tad to trade down 0.1% at $1.1005 by 0900 GMT.

European Union foreign ministers are split on whether to enter the United States in approving Russian oil; some countries, including Germany, claim the bloc is too dependent on Russia’s fossil fuels.

European Central Bank President Christine Lagarde and Chief Economist Philip Lane should give speeches later in the day.

Danske Bank analysts expressed that they see the euro diving to $1.05 in 12 months as Fed and ECB monetary policies diverge.

Bitcoin bounced to a three-week high. It was the last higher, 3.3% to $42,528.