Key facts
- The dollar index reached a 13-month high, influenced by Federal Reserve rate hike expectations.
- The yen neared a 40-year low against the dollar, with intervention warnings from Japanese authorities.
- U.S.-Iran peace talks stalled, contributing to safe-haven demand for the dollar.
- The Bank of Japan recently raised interest rates, but the yen continues to weaken.
- European currencies saw mixed performance against the dollar.
- The pound saw a slight increase after stronger-than-expected UK retail sales data.
The dollar held firm against most peers, nearing a 13-month high against a basket of currencies, as stalled U.S.-Iran peace talks and hawkish Federal Reserve signals bolstered demand for the safe-haven currency. The Japanese yen teetered near a 40-year low against the dollar, prompting speculation of market intervention by Japanese authorities.
The dollar's strength was largely attributed to the Federal Reserve's latest projections, which indicated that a majority of policymakers anticipate a year-end rate hike. This environment, coupled with lower Japanese interest rates even after a recent Bank of Japan hike, has weighed heavily on the yen.
Concerns over Japanese Prime Minister Sanae Takaichi's spending plans also contributed to undermining investor confidence in the yen. Traders were closely watching for potential intervention, especially given the lower-liquidity backdrop of a U.S. holiday.
European currencies experienced mixed fortunes. The euro hit a three-month low against the dollar before recovering, while the pound saw a slight gain after stronger-than-expected UK retail sales data, despite a larger budget deficit. The Swiss franc weakened against the dollar.