The dollar steadied yesterday as traders prepared for the Federal Reserve to raise interest rates, and as oil prices rebounded after sharp losses, while the yen edged closer to its lowest level in 40 years.
US Treasury yields remained elevated following the surge seen on Monday, with the yield on the two-year note — which is highly sensitive to interest rates — hovering near its highest level in 16 months, as traders braced for a possible rate hike later this year.
The dollar index, which measures the performance of the US currency against a basket of currencies including the yen and the euro, rose slightly to 101.01, a level not far from its one-year high of 101.13 recorded at the end of last week.
The euro last traded at $1.1423, hovering near a three-month low after European Central Bank President Christine Lagarde played down concerns about second-quarter inflation.
Sterling traded at $1.3246, largely stable following the resignation of Prime Minister Keir Starmer, which paves the way for an orderly transfer of power.
The Australian dollar and New Zealand dollar, both highly sensitive to risk, each fell around 0.1% to $0.6991 and $0.5704 respectively.
The yen last traded at 161.59 per dollar, after briefly sliding to a two-year low of 161.93 in late trading on Monday, as the dollar continued to rack up broad-based gains. A break through the 161.96 level would push the yen to its weakest since 1986.
A source told Reuters: "Japanese Finance Minister Satsuki Katayama held an online meeting with US Treasury Secretary Scott Bessent late on Monday amid growing concerns over sharp currency volatility. The meeting focused on addressing the yen's weakness, which has reached record levels, including the possibility of intervention in the currency market."