LONDON: The dollar held broad gains early on Wednesday, having rallied to an eight-year high against the yen after a batch of upbeat data bolstered the case for a U.S. interest rate hike this year.
The greenback climbed as far as 123.33 yen JPY= on Tuesday, reaching a high not seen since mid-2007. It last stood at 123.14, within reach of its June 2007 peak of 124.14. A break there would take it to levels last seen in late 2002.
Traders said stop-loss buying was triggered when the dollar cracked key resistance around the 122.04 high set back in March.
It also rose against the euro, which slid to its lowest since April 28 at $1.0864 EUR=. The common currency last stood at $1.0870.
All that helped the dollar index .DXY rally 1.3 percent on Tuesday, its biggest one-day gain in nearly two years. The index gained further to 97.380 in Asia, hitting one-month high.
Commodity currencies also lost ground against the resurgent dollar, with the Australian dollar AUD=D4 falling to a one-month low of $0.7727. Its New Zealand peer NZD=D4 skidded to its lowest in over two months at $0.7222.
In a keynote speech last Friday, Federal Reserve Chair Janet Yellen said interest rates are likely to rise this year but the pace of tightening will depend on the strength of economic data.
So the dollar’s rally should come as no surprise after news on Wednesday showed a core gauge of U.S. business investment spending plans rising solidly in April.
“The dollar is broadly supported after Yellen’s comments. The market will test the dollar’s upside for now unless U.S. policymakers warn against excessive strength,” said Osao Iizuka, chief currency dealer at Sumitomo Mitsui Trust Bank in Tokyo.
