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The dollar index, which measures the greenback against six other
currencies, climbed past 101 for the first time in more than two
years. It edged 0.07% lower at 100.74, down 0.1% at 0825 GMT.
The dollar's gains have been most striking against the yen,
climbing to its highest level of 128.32 yen against the Japanese
currency since May 2002. It was last up 1.3% at 128.24 yen.
The dollar has risen 5.4% on the yen so far this month, which
would be its second-biggest monthly percentage gain since 2016
after last month's 5.8%.
The euro recovered some grounds, trading 0.25% higher against
the dollar at $1.08095, but stayed just off last week's two-year
low of $1.0756.
"Policy divergence between the Fed and low-yielding central
banks (European Central Bank, Bank of Japan) continues to argue
in favour of USD strength," said Francesco Pesole, FX Strategist
at ING.
The benchmark U.S. 10-year Treasury yield on Tuesday was just
off its three-year high of 2.884% hit on Monday. Yields on
10-year U.S. inflation-linked bonds are within touching distance
of turning positive for the first time in two years.
Expectations that the U.S. Federal Reserve will tighten its
monetary policy have continued to provide support to the dollar.
U.S. inflation is "far too high", St. Louis Federal Reserve Bank
President James Bullard said on Monday as he repeated his case
for increasing interest rates to 3.5% by the end of the year.
In the meantime, the BoJ has been intervening to keep the yield
on Japanese 10-year government bonds around 0% and no higher
than 0.25%.
Many investors are betting the yen has further to fall. The
latest CFTC data for the week ending April 12 shows net short
yen positions are the largest in three and a half years.
Japanese Finance Minister Shunichi Suzuki made the most explicit
warning against the yen's recent slump on Tuesday, saying the
damage to the economy from a weakening currency at present is
greater than the benefits from it.
Elsewhere, the dollar rose to as high as 0.9466 Swiss francs,
its highest in a year.
Sterling was at $1.3026, in sight of its 17-month low against
the dollar of $1.2973, hit last week.
European currencies weren't helped by the latest fighting in
Ukraine.
The Australian dollar rose 0.56% from Monday's one-month low and
was at $0.739, given some support by minutes published Tuesday
from the Reserve Bank of Australia's April policy meeting, which
suggested the central bank was edging closer to raising interest
rates for the first time in more than a decade.
Bitcoin also managed to find its feet, trading around $40,800
after hitting a one-month low of $38,547 on Monday.
(Reporting by Joice Alves, additional reporting by Alun John;
Editing by Gareth Jones)
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