Kevin Buckland

TOKYO, Reuters – On Wednesday the dollar rose to a new two-week high against the yen. This was due to higher Treasury yields and global inflation fears.

The index measures the currency’s performance against six main peers including Japan. It rose by 0.19%, to 101.94. That is an increase of 0.38% from Tuesday when data revealed that euro-area consumer inflation had reached a new record.

The greenback rose 0.28% to 129.07yen. It had previously touched 129.185 on May 18, the last time it was there.

The benchmark 10-year Treasury yields climbed to 2.884% overnight. It is the highest rate since May 19.

After the European Central Bank’s shift to a more hawkish position on Monday, the euro lost 0.15% to $1.0718.

On Monday, the dollar index fell to 101.29 after falling back from a two-decade high of 105 at mid-May. The Federal Reserve’s tightening of policy was causing inflation in America and other economic indicators to show signs of peaking.

In line with what Fed policymakers are indicating, markets priced half-point rises in interest rates for Fed meetings next month and this month. However, it is unclear what the future holds.

The U.S. Jobs Report, which is due Friday, will be closely monitored and may provide new insights.

In a note to clients, Westpac strategists stated that it was still premature to predict a DXY long-term peak. They were referring to the dollar index.

“End-2023 is priced at 180bp for ECB rate rises. This price is the same as that of the Fed. However, it’s difficult to envision the ECB going toe to toe.”

They wrote that the dollar index might range from 101 to 105 “for a while” until its bull trend returned.