Currencies: U.S. Dollar Index hits fresh 2-year high as yields rise and yen keeps taking a hit


The dollar touched another two-year high on Monday, pummeling the yen, as yields continued to rise on expectations for further rate increases by the Federal Reserve.

The U.S. Dollar Index DXY, +0.15% briefly broke above 100 in overnight trading, the highest since May 10, 2020, and was up around 0.2%. The greenback also hit another seven-year high against the yen USDJPY, +0.13%, with the Japanese currency depreciating to around 125.36 per dollar; that’s the weakest since it reached an intraday level of 125.65 in June 2015, according to FactSet.

Source: FactSet

Expectations for higher U.S. rates are rippling throughout the financial system ahead of Tuesday’s consumer-price index report for March, which is expected to show an annual headline rate above 8%. The impact is being felt in everything from rising mortgage rates and car loans to a continued selloff in stocks on Monday. The dollar tends to benefit from higher rate expectations relative to other countries like Japan, where policy makers are more concerned about the risks to the economic recovery and are still clinging to easy monetary policy.

“The U.S. dollar continues to be supported by the rising rates,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. “The U.S. 10-year yield is probing 2.75% and for the first time since 2010 traded above similar Chinese yields.”

As of Monday morning, Treasury yields were mostly higher, led by intermediate and long-end rates, while all three major stock indexes DJIA, -1.19% SPX, -1.69% COMP, -2.18% were down.

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