Dollar Strengthens as ECB Considers Rate Cuts, Yen Plummets to 34-Year Low

The dollar soared in response to potential European Central Bank (ECB) rate cuts, causing the Japanese yen to hit a new 34-year low. This dynamic shift occurred as the ECB signaled possible rate reductions this summer, contrasting with the U.S. Federal Reserve’s more cautious stance due to persistent economic heat in the U.S.

The euro fell to $1.0644, its lowest in five months, marking a significant weekly decline of 1.5%. Meanwhile, the dollar’s broad rally was further evidenced by the dollar index climbing 0.59% to reach a five-month peak of 105.94. 

This surge reflects growing disparities in monetary policy expectations between the U.S. and Europe, influenced by a recent spike in U.S. inflation that has adjusted Fed rate cut forecasts from June to September. 

With the yen down over 1% for the week and approximately 8% since the beginning of the year, market analysts speculate on the timing and level of possible interventions to curb its decline. 

For a more detailed analysis, read the full article on Reuters.