By Alun John

HONG KONG (Reuters – The exchange rate was above 100 this morning due to the high yields in the United States ahead of inflation data which is expected show that U.S. prices have increased by more than 16 years. These results will reinforce expectations of Fed tightening.

The index was 100.11 at the end of last week. It had surpassed 100.19, which was a near-two-year record.

Dollar’s gains against the Japanese yen have been the most impressive. It traded at 125.47yen Tuesday morning. This was just below the overnight intraday peak of 125.77 when it was close to its June 2015 peak, 125.86. If the dollar moves above that point, it will reach its highest level against the Japanese yen in 2002.

Shunichi Suzuki, the Japanese Finance Minister declined Tuesday to discuss specific foreign currency market prices. However, he said excessive volatility and disorderly movement could adversely affect both economic and financial stability.

Overnight, the dollar gained steadily and reached an overnight high of 6.390 early trade.

The dollar’s strength “was most apparent against JPY and CNH – currencies of economies with a dovish central bank,” said analysts at CBA in a morning note.

Bank of Japan intervened repeatedly to maintain benchmark bond yields at zero.

CBA analysts stated that they expect very high U.S. inflation to increase expectations for aggressive Federal Reserve tightening. According to them, further gains are possible for the dollar because the 50 basis points rate hike is not yet priced in at each Fed meeting.

“We anticipate the dollar to remain bid and to rise to the pandemic high at 103 pts within the next months.”

A Reuters poll found that March was the most expensive month for American consumers in 16-1/2 Years. The reason? An increase in gasoline prices due to war in Ukraine.

Nevertheless, longer-term yields in the United States continued to rise.

The benchmark 10-year note yield rose to 2.836%. It was its highest point since December 2018. It would mark the eighth consecutive session of gains in benchmark yields if Tuesday’s advance is sustained.

The yield of the Treasury 30-year bond shot up to 2.86%. This is its highest point since May 2019.

Aside from that, gains made by the mini-relief rally Monday in euro were not sustained after Marine Le Pen was defeated by Emmanuel Macron, the French leader.

Last Friday, it was at $1.087.

According to analysts at Rabobank, “the bottom line is, that we are exactly where we were before yesterday’s vote.”

Although Macron appears to be returning to power following the April 24, vote, the magnitude of his win is unlikely to exceed that five years ago when he was considered an upstart. It’s also likely that it will be much smaller than that which he saw as an upstart five year prior.

Lower oil prices meant that the Australian dollar, which is commodity-linked, was in decline at $0.7403. Also, the New Zealand dollar fell to $0.6807 ahead of the closely-watched meeting of the Reserve Bank of New Zealand where a 50 basis points rate increase is expected. [RBNZWATCH]

Sterling dropped to $1.30155