Mar 21, 2022 11:58PM ET
By: AnalysisWatch
The dollar rose in Asia on Tuesday morning, while the yen dropped below 120 for the first time since 2016. Investors resumed digesting an aggressive speech by Federal Reserve Chairman Jerome Powell, which boosted bets on higher US interest rates and widened the policy gap with the more cautious Bank of Japan.
By 11:51 p.m. ET, the US dollar index, which measures the greenback against a basket of other currencies, had risen 0.10 percent to 98.602.
The USD/JPY pair rose 0.36% to 119.90.
The AUD/USD pair increased by 0.01% to 0.7401, while the NZD/USD pair increased by 0.03% to 0.6886.
The USD/CNY pair gained 0.12% to 6.3639, while the GBP/USD pair rose 0.09% to 1.3152.
The yen fell about 0.4%, briefly reaching 120.08 per dollar at the start of the session. It has fallen about 4% this month as rising US yields have attracted outflows from Japan.
US bonds and interest rate futures fell further overnight after Powell said policymakers must act "expeditiously" and raised the possibility of 50 basis point rate hikes.
Fed funds futures have increased the likelihood of a 50 basis point rate hike in May 2022 by almost two-thirds and now predict that the policy rate, currently below 0.5%, will exceed 2.5% in 2023. US 10-year benchmark yields have risen 14 basis points and the spread over anchored Japanese 10-year yields has widened to 2.0914%, the highest in more than two and a half years.
Movements in bond markets, as well as the ongoing fighting following Russia's invasion of Ukraine on February 24, also gave the dollar broad strength elsewhere.
In offshore trading, the Chinese yuan traded at 6.3739 to the dollar, falling from recent highs and settling in a new range as investors await promised monetary easing.