The index settled at 100.11, testing last week’s nearly two-year high of 100.19.
The dollar’s gains were the most striking against the yen, and it was trading chaotically at 125.47 yen on Tuesday morning, just off the overnight intraday high of 125.77, as it edged closer to its June 2015 high of 125.86. Exceeding this level would take the dollar to its highest level against the yen since 2002.
Japanese Finance Minister Shunichi Suzuki on Tuesday declined to comment on specific prices in the foreign exchange markets, but said excessive volatility and disorderly moves could have a negative effect on the economy and financial stability.
The dollar also steadily gained ground overnight against the offshore Chinese yuan, and hit a two-week high of 6.390 in early trading.
Dollar strength “has been most apparent against the JPY and CNH – the currencies of economies with a dovish central bank,” CBA analysts said in an early morning statement.
The Bank of Japan has intervened several times to keep benchmark bond yields around zero.
CBA analysts said they expected very high inflation in the US to bolster expectations of aggressive Federal Reserve tightening. They said that since a 50 basis point rate hike was not yet fully scheduled for each of the next two Fed meetings, they expect further gains for the dollar.
“We expect the dollar to remain bullish and hit the pandemic high of 103 pts in the coming months.”
According to a survey of economists carried out by Reuters, consumer prices in the United States probably rose in March for 16 and a half years, as the war in Ukraine pushed the cost of gasoline to record highs.
Meanwhile, longer-term US yields continued to trend higher.
The yield on the benchmark 10-year bond rose to 2.836%, its highest level since December 2018. If Tuesday’s early advance continues, it would be the eighth straight session of gains for benchmark yields.
The yield on the 30-year Treasury bond rose to 2.86%, its highest since May 2019.
Elsewhere, the euro was unable to hold on to gains from its mini-recovery on Monday after French leader Emmanuel Macron beat far-right opponent Marine Le Pen in the first round of presidential voting.
It stood at $1,087, little different from its Friday close.
“The bottom line, then, is that we are where we were before yesterday’s vote,” Rabobank analysts said.
“Macron appears poised to return to power after the April 24 vote, but the size of his victory is likely to be much smaller than when he was seen as an upstart five years ago and likely slim enough for the political earthquake to strike. What a Le Pen victory would be cannot be entirely dismissed.”
The Australian dollar was down at $0.7403 as lower oil prices weighed on the commodity-linked currency. The New Zealand dollar was also down to $0.6807, ahead of a closely watched Reserve Bank of New Zealand meeting where a 50 basis point rate hike is being considered. [RBNZWATCH]
The pound fell slightly to $1.30155.