The dollar hit a five-year high against the yen today, as traders braced for the US Federal Reserve to begin hiking rates, while reckoning the Bank of Japan remains dovish.

Commodities and commodity currencies eased amid hopes for progress in Russia-Ukraine peace talks. Cryptocurrencies rose after Tesla boss Elon Musk said on Twitter that he owns and won’t sell ether, bitcoin and dogecoin.

The dollar touched ¥117.88 (RM4.21) in Asia trade, its strongest since January 2017, at the start of a busy week of central bank meetings in the United States, Britain and Japan.

“The Ukraine conflict is not expected to prevent the BoE and Fed from raising rates in the week ahead while the BOJ stands pat,” said analysts at Japan’s MUFG Bank.

“Unless there is a significant de-escalation in the Ukraine conflict, the dollar should remain stronger.”

Futures are pricing in between six and seven US rate hikes of 25 basis points each this year, and six in Britain as the war in Ukraine adds to global inflationary pressures.

In contrast, the BOJ is set to remain dovish at its meeting this week as policymakers try to boost the country’s weak economic recovery from the pandemic.

A glimmer of hope for progress toward peace emerged after US Deputy Secretary of State Wendy Sherman said Russia showed signs it might be willing to have substantive negotiations over Ukraine, taking the edge off commodity currencies today but sterling and the euro remain under pressure.

The Australian dollar was last down 0.5 per cent at US$0.7256 and the kiwi 0.2 per cent lower at US$0.6791. The euro was parked at US$1.0915 while sterling slipped 0.2 per cent to US$1.3013, a 16-month low.

“With the UK more exposed to the Russian supply shock than the US, we think the risks lies with disappointment by the BoE and a weaker sterling down to US$1.2894,” said Commonwealth Bank of Australia analysts.

The dollar index crept up to 99.214.

Pressure on bonds was unrelenting and the two-year Treasury yield, which moves with short-term interest rate expectations, hit a 2-1/2-year high at 1.8090 per cent and benchmark 10-year rates rose to a one-month high of 2.06 per cent.

Bitcoin caught a boost and rose 2 per cent to US$38,560, while ether was last up 2.2 per cent at US$2,573 after traders took a bullish cue from a series of tweets from Tesla’s Musk about high inflation.

“It is generally better to own physical things like a home or stock in companies you think make good products, than dollars when inflation is high,” Musk said.

“I still own and won’t sell my bitcoin, ethereum or doge.”

Source: Reuters