Dollar eyes best week against yen in three months; cryptos leap

By Rae Wee

SINGAPORE (Reuters) – The dollar was headed for its best week against the yen in three months on Friday, after Federal Reserve Chair Jerome Powell and a chorus of Fed officials poured cold water on market expectations of a peak in U.S. rates.

In cryptocurrencies, bitcoin and ether held near multi-month highs, with renewed speculation over the imminent approval of an exchange-traded bitcoin fund breathing new life into the digital assets.

A slew of Fed policymakers including Powell on Thursday said they are still not sure that interest rates are high enough to finish the battle with inflation, comments taken as hawkish by markets and which sent the greenback rising.

The dollar stood near a one-year high at 151.38 yen on Friday and touched one-week highs against the Australian and New Zealand dollars.

“Powell’s speech was quite hawkish, and that just really hit sentiment,” said Tina Teng, market analyst at CMC Markets (LON:).

The remarks from Fed officials came a week after the U.S. central bank left interest rates steady and cemented expectations that rates could have peaked, causing the dollar and Treasury yields to tumble in the aftermath.

The greenback, however, regained its footing this week and was eyeing a weekly gain of roughly 1.3% against the yen, its best performance since August.

“Dollar/yen did trend higher this week and it’s now back above 151. It does raise the risk of the BOJ stepping into the (forex) market to strengthen the yen, but I think markets are expecting no intervention unless dollar/yen moves to about 152,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia (OTC:).

The and the were likewise headed for a 2.4% and 1.8% weekly decline against the dollar respectively, also their steepest drop in months.

“Even though we don’t expect Powell to deliver on the tightening bias, that tightening bias does support the dollar,” said Kong.

The Australian dollar last stood at $0.6359 after slipping to a one-week low of $0.6352 earlier in the session, while the New Zealand dollar was last at $0.5893, having similarly hit a one-week trough of $0.5886 earlier.

Falling oil prices and a faltering economic recovery in China have also kept a lid on the Antipodean currencies.

Australia’s central bank, in its quarterly Statement on Monetary Policy released on Friday, warned there were risks of further upside surprises to inflation following its latest hike in interest rates, while also raising forecasts for economic growth and employment.

Elsewhere, the euro steadied at $1.0668, while sterling slipped 0.02% to $1.2218. They were both on track to lose 0.56% and 1.3% for the week, respectively.

, the world’s largest cryptocurrency, meanwhile held near an 18-month high and last bought $36,519, having peaked at $37,978 in the previous session, its highest level since May 2022.

The second-largest cryptocurrency Ether last stood at $2,102.90, after similarly jumping to its highest since April of $2,131.50 in the previous session.

Prices of the digital assets have surged on swirling speculation of an imminent approval of BlackRock (NYSE:)’s spot bitcoin ETF, with the asset management giant also having registered to create an ethereum trust.

“The potential approval of spot ETFs by the (U.S. Securities and Exchange Commission) could significantly impact the cryptocurrency sector,” said Carl Szantyr, managing partner of digital asset hedge fund Blockstone Capital.

“Such an endorsement would make it more accessible for institutional investors to enter the crypto space, likely boosting demand and subsequently, prices.”

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