Early morning on Tuesday saw the yen hitting a three-year low while the US dollar hiked during the same period. However, the Japanese currency continued to fall sharply following the speculation that Japan may demand more US dollars due to rising energy costs. Moreover, there are rumours that the US may raise the interest rates well before its competitors.
The US Dollar index rose to 94.403 by 0.03 per cent at 2:26 AM GMT (10:26 PM ET). The USD/JPY pair spiked to 113.36, up by 0.05 per cent. Notably, the yen recorded its worst session against the greenback in five months.
The AUD/USD pair inched down to 0.7737 or 0.20 per cent. Meanwhile, the NZD/USD pair plunged to 0.6927, down by 0.22 per cent.
The USD/CNY pair edged up to 6.4506 by 0.01 per cent. On the other hand, the GBP/USD pair skidded to 1.3589 by 0.05 per cent.
As per Kim Mundy, senior economist and currency strategist, Common Wealth Bank of Australia said that the current activities in the currency markets were an amalgamation of the outlook for the Fed Reserve. Several markets are expecting tapering in November 2021.
She called the events in the commodities market a pretty broad rally. Adding further, Kim stated that the following factors were affecting the yen, as Japan was the energy importer. Also, spiking energy rates can inflict consumption tax. Moreover, the bank of Japan wouldn’t consider the reduction of ultra-accommodative monetary policy.
Meanwhile, the inflationary impact of the soaring energy prices also indicates that the Federal Reserve of the US will start asset tapering in November 2021, as planned. Additionally, it is ready to hike interest rates in 2022 despite the disappointing outcome of jobs report data on Friday.
However, other central banks are also concerned regarding the prices. The Bank of England is readying itself to hike the interest rates to chicken out the rising inflation.
The South Korean currency won plunged to 1200 against a dollar. It happened for the maiden time in fourteen months. It was led by the decision of the Bank of South Korea to keep the interest rate steady at 0.75 per cent. The policy was announced earlier in the day.