Dollar surges as Fed threatens rate hikes — ride the momentum against the Japanese yen
The new Federal Reserve chief is signaling he might raise interest rates to fight inflation, which is supercharging the U.S. dollar and pushing foreign currencies like the Japanese yen to multi-year lows.
Idea
When the Federal Reserve hints at raising interest rates, it makes the U.S. dollar much more attractive to global investors seeking higher returns. At the same time, Japan is dealing with a significantly weaker currency that just hit a two-year low against the dollar. Higher U.S. rates combined with a struggling Japanese yen create a powerful tailwind for the dollar to keep gaining ground. Even though there is always a chance government officials step in to stop the yen's decline, the fundamental pressure is clearly pushing the dollar higher right now.