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Dollar Near Multi-Year Highs on Equity Weakness, Hawkish Fed
USD/JPY near 162.00, USD/CAD at 1.4300. The dollar holds near highs on equity weakness and hawkish Fed bets. Next catalysts: US PCE data, Fed comments.
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The dollar held near multi-year highs on Tuesday. Traders said the greenback drew support from a slide in equity markets and expectations that the Federal Reserve will keep rates restrictive for longer. The safe-haven appeal and the yield advantage of US assets continued to attract flows, even as oil prices corrected and geopolitical tensions eased slightly, they said.
The S&P 500 fell 0.8% on the session, extending a week-long decline. That shift in risk appetite pushed capital into the dollar, several traders said. At the same time, interest-rate futures priced in a high probability that the Fed's next move would be a rate hike, not a cut, after a string of resilient economic data and sticky inflation prints.
[USD/JPY](/markets/soft-us-jobs-data-lower-yields-end-dollars-june-rally) traded near 162.00, a level not seen since 1990. The wide rate differential between the US and Japan remains the primary driver. Japanese authorities have signaled they are watching the yen's slide. Traders said intervention risks are low as long as the move is orderly. Technical analysts said the next resistance sits at 163.00, with a break opening a run toward 164.00. A sharp reversal toward 160.00 would not surprise some traders, given the pair is trading in a zone of long-term resistance on monthly charts.
USD/CAD pushed toward 1.4300, approaching resistance that has held since 2020. The Canadian dollar weakened. Oil prices slipped, and the Bank of Canada cut rates while the Fed held steady. Traders said a break above 1.4300 would target 1.4350. A rejection could trigger a drop toward 1.4140-1.4200.
The next test for the dollar comes with Thursday's initial jobless claims and Friday's PCE inflation data. Fed Governor Christopher Waller is also scheduled to speak Wednesday. US PCE, Jobless Claims, and Fed Williams: Today's Dollar Drivers outlines the key events. Traders said any sign of softening in the labor market or inflation could shift the rate outlook and weaken the dollar. For now, the bias remains toward further gains.