The US Dollar continued its ascent on Monday, trading near recent multi-week highs against both the Japanese Yen and the Euro, as expectations for further Federal Reserve (Fed) interest rate hikes bolstered the Greenback. The USD/JPY pair advanced to around 157.45, up 0.36% on the day, maintaining proximity to recent highs despite the Bank of Japan's (BoJ) monetary tightening. The BoJ raised its policy rate by 25 basis points to 1.25% on Friday, marking its highest level in 31 years, but internal divisions within the BoJ policy board have cast doubt on the pace of further tightening, limiting support for the Yen [1].
Meanwhile, the Euro also struggled against the US Dollar, with EUR/USD trading around 1.1473, near levels last seen in late July. Both the Fed and the European Central Bank (ECB) raised interest rates by 25 basis points last week and signaled openness to additional tightening to achieve their 2% inflation targets [2]. However, traders favored the higher-yielding US Dollar, leaving the Euro vulnerable, especially given the Eurozone's reliance on imported energy and ongoing political and fiscal uncertainties in Germany and France [2].
Market data showed the US Dollar Index (DXY) trading around 100.35–100.36, just below the seven-week high of 100.56 reached on Friday [1][2]. US Treasury yields remained elevated, with the 10-year yield at approximately 4.97%, slightly below last week's 5.04% peak, the highest since 2007 [1][2]. Elevated yields were attributed to persistent inflation concerns amid the war in the Middle East and a geopolitical risk premium in energy prices [1][2].
Authorities in Japan have shown increased vigilance regarding the Yen's weakness, with the BoJ conducting a rate check with market participants on Friday, a move often associated with potential foreign exchange intervention [1]. Meanwhile, the Euro was the strongest against the Japanese Yen among major currencies today, according to a heat map of percentage changes [2].
On the geopolitical front, US President Donald Trump indicated a willingness to meet Iranian President Masoud Pezeshkian at the United Nations General Assembly this week, and markets are also monitoring the upcoming Trump-Xi summit scheduled for September 23–25 [1][2].
CONCLUSION
The US Dollar's strength is being driven by hawkish Fed expectations and elevated Treasury yields, putting pressure on both the Japanese Yen and the Euro. Despite recent rate hikes by the BoJ and ECB, internal divisions and regional uncertainties have limited support for their respective currencies. Market attention remains focused on central bank policy signals and geopolitical developments, which continue to shape currency movements.