Strong Dollar, Yen Nears Intervention-Vulnerable Level
The US dollar held firm against most major currencies on Friday (June 19), as markets weighed uncertainty over a US-Iran peace deal and hawkish signals from the Federal Reserve. Pressure was most evident on the yen, which hovered around 161.3 per dollar after briefly touching 161.8 late Thursday.
That level is approaching 161.96, recorded in July 2024. If the dollar breaks through that level, the yen risks weakening to its lowest level against the dollar since 1986, raising market concerns about possible direct intervention by Japanese authorities.
The dollar's strength this week was driven by the Fed's latest projections, which showed nine of 19 policymakers expect an interest rate hike by the end of the year. This signal lifted the dollar to a 13-month high against a basket of major currencies as markets assessed the potential for higher US interest rates to remain higher for longer.
The yen remained under pressure as the interest rate spread between Japan and other countries remains wide, despite the Bank of Japan raising interest rates to a 31-year high. Concerns about Japanese Prime Minister Sanae Takaichi's spending plans also weakened investor confidence and fueled speculation that further intervention could be necessary.
Geopolitically, the dollar, a safe-haven asset, gained support after US talks with Iranian negotiators in Switzerland were canceled on Friday. However, risk sentiment received some support from reports of an Israeli-Hezbollah ceasefire in Lebanon, which helped defuse one of the threats to the interim US-Iran deal.
In Europe, the dollar's pressure against the euro and pound began to ease toward mid-session. The euro briefly touched a three-month low of $1.1418 before recovering to around $1.1464. The pound also briefly fell to a more than two-month low of $1.3164, before rebounding slightly to around $1.322.
Sterling is sensitive to a combination of domestic data and political risks. UK retail sales for May were stronger than expected, but a larger budget deficit and Andy Burnham's victory in a parliamentary seat in northern England added to uncertainty about Prime Minister Keir Starmer's leadership.
The Swiss franc weakened after the Swiss National Bank maintained its benchmark interest rate and reiterated its readiness to intervene to stem currency appreciation. The dollar briefly rose to 0.8091 franc, its highest level since November 2025.
The market's next focus will be on the USD/JPY level around 161.9, the response from the Japanese Ministry of Finance, developments in the US-Iran deal, and the direction of US yields following the Fed's hawkish signal. As long as interest rate differentials remain wide and geopolitical risks remain unabated, the dollar has the potential to remain supported, although profit-taking could limit gains. (arl)
Source: Newsmaker.id
