Tokyo: The U.S. dollar hit fresh two-decade highs against major peers on Thursday after the Federal Reserve’s dovish outlook for interest rates and Russian President Vladimir Putin ordered the country’s first mobilization since World War II.
The dollar index, which measures the currency against a basket of six peers including the euro, sterling and yen, rose to 111.79 for the first time since mid-2002.
The greenback climbed above 145 yen to a new 24-year high after the Bank of Japan maintained ultra-low interest rates and dovish policy guidance on Thursday.
It also hit new highs against regional currencies ranging from the Australian and New Zealand dollars to the offshore Chinese yuan and Korean won, as well as the Singapore dollar and Thai baht.
The Fed released new projections showing rates at 4.6% next year with no cuts until 2024.
It raised its target interest rate range by 75 basis points overnight to 3.00%-3.25%, as widely expected.
The dollar was already supported by demand for safe-haven assets after Putin announced he was calling on reservists to fight in Ukraine and said Moscow would respond with the force of its vast arsenal if the West called it “nuclear blackmail.” said Struggle there.
The two-year US Treasury yield hit a fresh 15-year high of 4.132% in Tokyo trade.
The rupee closed at 237.91 against the US dollar, inching closer to historic lows
“Both the Fed estimates and Russia headlines contributed to the dollar’s strength, which was particularly severe against the euro and other European currencies,” said Shinichiro Kadota, a senior FX strategist at Barclays in Tokyo.
“Commodity currencies also took a big hit due to deterioration in risk sentiment.”
The dollar rose as high as 145.405 yen, but then bounced back after an initial knee-jerk reaction to the BOJ’s announcement, and last traded 0.31% higher at 144.53.
The result bolstered market expectations that the BOJ would continue to float against a global wave of monetary tightening, despite a weaker yen.
The Bank of England also announced policy on Thursday, leaving markets divided over whether a 50 or 75 basis point hike is on hold.
Sterling fell to a fresh 37-year low of $1.1221, and last traded hands at $1.1240, down 0.26% from the previous session.
The euro weakened to a new 20-year low of $0.9807, before trading down 0.18% at $0.9820 on Wednesday.
Aussie fell 0.6% to $0.6593 after touching $0.6583, its lowest since mid-2020.
A public holiday in Australia could dilute liquidity in the currency.