Forex Top Team

Continued Strength in the US Dollar: Expectations of Further Rate Hikes in the US, While the UK and Europe Show Signs of Holding Rates

 

This week, the US dollar continues to strengthen. Alongside rising US bond yields, the US dollar has steadily increased its value against various currencies. The USD/JPY pair has surpassed 149, while EUR/USD has softened to the 1.05 range, and GBP/USD has entered the 1.21 range.

Following a series of policy announcements by central banks in the US, Japan, the UK, and Europe in recent weeks, expectations of additional rate hikes persist in the US. Meanwhile, the Bank of England (BoE) and the European Central Bank (ECB) are leaning toward maintaining higher rates over the long term while pausing rate hikes. The Bank of Japan (BoJ) has hinted at moving away from negative interest rates and Yield Curve Control (YCC) but remains committed to easing policies in the near term.

The Japanese government and others have advocated for a stable exchange rate based on fundamentals. The relatively low short-term volatility currently observed in the market reflects such a situation. However, there is lingering caution in the market due to concerns about abrupt market changes resulting from interventions, especially as the yen is approaching levels beyond those seen during last year’s currency interventions.

This week is also the month-end week, with observations related to the Tokyo fixings, London fixings, and fund repatriation. Even economic indicators that are considered relatively minor have the potential to trigger market movements as they are used to explain price actions. So, it’s essential to remain vigilant.

Regarding trading plans, the focus is on selling CHF. The situation with USD/JPY is characterized by increasing concerns about intervention. While the upside has been pushing higher, it’s gradually becoming heavier. If there is a significant drop, there are plans to initiate buying positions.