Dollar Plunges as Weak Confidence and Diplomatic Pressure Take Toll
The US dollar has recorded its worst monthly performance since April due to doubts over Kevin Warsh's hawkish views and the US's intention to shift from air strikes to diplomacy in the Middle East.
Speculators are unwinding their net long positions in the greenback, which had been at record levels since 2015. The USD index is falling even against a backdrop of high Treasury bond yields, indicating a decline in confidence in the policies pursued by the White House and the Federal Reserve.
The simultaneous sell-off of both the currency and Treasuries has sparked concerns about US participation in currency interventions coordinated with Japan.
Over three trading days, USD/JPY plummeted to its lowest level since early May, with an estimated intervention scale of $54 billion. Washington makes no secret of its presence on the forex market, with US Treasury Secretary Scott Bessent stating that the Treasury would not hesitate to re-enter the foreign exchange market.
Donald Trump described the intervention as a sign of friendship with Tokyo, while the Bank of Japan kept its overnight rate at 1%, with Kazuo Ueda warning that greater attention needed to be paid to the acceleration in price growth. This was seen as a signal that monetary policy would be tightened in the autumn.