Mumbai, 2 Jul (Commoditiescontrol): The U.S. dollar neared a 38-year high against the yen on Tuesday, driven by a spike in Treasury yields as investors speculated about the implications of a potential second term for Donald Trump as President.
Meanwhile, the euro maintained its strength as rival French political parties united to prevent the far-right National Rally (RN) from gaining power. In Asian markets, equities presented a mixed picture, while crude oil prices edged higher following a robust rally in the previous session.
U.S. Federal Reserve Chair Jerome Powell's upcoming speech at an event hosted by the European Central Bank is set to bring U.S. monetary policy into sharper focus. This comes in a week packed with key employment reports, including Tuesday's JOLTS job openings data, a Fed favorite.
The dollar strengthened slightly to 161.56 yen on Tuesday, remaining close to its overnight high of 161.72 yen, a level last seen in December 1986. This currency pair is highly sensitive to U.S. yields, and the benchmark 10-year Treasury yield surged nearly 14 basis points to 4.479% at the start of the week. Analysts attributed this rise to expectations of a Trump victory, which could lead to higher tariffs and increased government borrowing. The 10-year yield stood at 4.4534% during Tokyo hours.
The surge in yields was initially triggered by President Joe Biden's weak debate performance last week. Additional momentum came from the Supreme Court's ruling on Monday that Trump has broad immunity from prosecution over attempts to overturn his 2020 election loss.
The yen's weakness has traders on alert for potential Japanese intervention, especially after authorities spent around 9.8 trillion yen ($60.65 billion) in late April and early May when the currency plummeted to 160.82 per dollar.
The euro held steady against the dollar, easing 0.07% to $1.0733 after hitting $1.0776 on Monday, its highest level since mid-June. Investors were relieved that Marine Le Pen's anti-immigrant, eurosceptic RN party did not secure a larger share of the first-round vote over the weekend. Now, her opponents are uniting to strategically withdraw candidates from the second-round vote on Sunday, ensuring only the strongest candidate faces the RN representative. The deadline for this tactical withdrawal is later on Tuesday.
Asian stocks began Tuesday with a lackluster performance. Banks boosted Japan's Nikkei by 0.6% amid rising domestic bond yields, while property shares lifted Hong Kong's Hang Seng by 0.3%. Conversely, mainland Chinese blue chips remained flat, the tech-heavy Taiwan index fell by 0.8%, and South Korea's Kospi declined by 0.6%. MSCI's broadest index of Asia-Pacific shares outside Japan dropped by 0.2%.
Elsewhere, crude oil prices continued to rise following a roughly 2% gain on Monday, fueled by the start of the northern hemisphere's summer driving season. Brent futures increased by 0.21% to $86.78 per barrel, building on a 1.9% rally overnight. U.S. West Texas Intermediate (WTI) crude climbed 0.13% to $83.49, extending a 2.3% jump from the previous session.
(By Commoditiescontrol Bureau: 09820130172)
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