Dollar Dumps as Yen Soars on Tokyo Intervention

The US dollar suffered its worst two-day performance in January amid growing doubts about the Federal Reserve's ability to curb inflation. The market reassessment was fueled by hawkish rhetoric from the Bank of England and Japan's currency intervention, which helped boost the yen.

The Fed's July FOMC meeting outcome has left investors concluding that Kevin Warsh is not a hawk, but rather seeks to shift the burden of curbing inflation onto financial markets. This stance risks prolonging the pause in monetary tightening and weakening the greenback.

The likelihood of a September rate hike by the Fed continues to decline, while a drop in US Treasury yields has dragged the dollar down. The stabilisation of oil prices and rising stock market indices have also reduced demand for safe-haven assets like the dollar.