The yen /USD hit the highest level in the three on Monday, fueled by the shift in the tone of Fed Chair Jerome Powell and Bank of Japan Governor Kazuo Ueda, the latter remained hawkish. Other major currencies were also affected by this divergence of central bank policies; the dollar remained near a 13-month low against the euro and near levels last witnessed in March this year against the British pound.
Earlier today, the dollar dropped to its lowest level at 0. 59% to 143. 1731, touching an intra-day low of 56 yen – its lowest since August 5 – before rebounding to 0. 25% decline. While these shares were going up, sterling remained constant at $1. 3215, after it had risen to $1. 32295 on Friday, its highest since February 2020.
The dollar fell after Powell spoke at the Federal Reserve’s annual Jackson Hole symposium, the US central banker employed starker language than anticipated and switched to a dovish tone. BOJ’s Ueda on the other hand was more inclined towards a hawkish stance during his testimony before the parliament on Friday where he stressed the requirement of changing the extent of easing of monetary policy which most attributed to further rate hikes.
The dollar index, which tracks the performance of a basket of six major currencies including the greenback against the euro, sterling, and yen, however, remained at 100. 64, which is only slightly higher than the 13-month low 100. 60 reached last week. Indeed, when the experiment was taking place the euro was hovering at about $1. 1190, just below its recent high which is $1. In the wake of the release of indicators indicating that ECB policymakers plan to scale back more the rates in September, the index stood at 1201.
On other currencies, the Australian dollar lost 0. 1% to $0. Chg. -11/ + 0. 32% 6790, staying close to the highest level since 11 Julie. The Chinese yuan on the other hand firmed marginally to 7. 1130 per dollar in offshore trading, beating its previous high that was recorded on August 5.
Market participants are now looking forward to the next FED meeting scheduled for September 18th with growing hope of a 50 bps cut that is owed to the rising volatility in the market as well as fluctuations in the policy announced by the central bank.