A U.S. one hundred dollar bill and Japanese 10,000 yen notes are seen in this photo in Tokyo, February 28, 2013. REUTERS/Shohei Miyano

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  • The dollar gains another 1.4% against the yen
  • Japan’s finance minister warns of risks from falling yen
  • The dollar hits its highest level against the Swiss franc since July 2020
  • Aussie boosted by RBA minutes showing rate hike nears

NEW YORK/LONDON, April 19 (Reuters) – The dollar hit a new 20-year high against the Japanese yen on Tuesday, buoyed by the divergence in monetary policy between a Federal Reserve determined to contain soaring inflation and a Bank of Japan which kept interest rates extremely low.

The greenback hit 128.765 yen, the highest since May 2002. It was last up 1.4% to 128.74 yen. The dollar has risen 5.4% against the yen so far this month, pacing its second biggest monthly percentage gain since 2016 after 5.8% last month.

“The BOJ has done the opposite of normalization. It has sunk in,” said Richard Benson, co-chief investment officer at Millennium Global Investments in London.

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But he thinks that the Japanese monetary authorities could indeed intervene to strengthen the yen, but it is not a particular level.

“I wouldn’t be surprised if the BOJ steps in because they have a lot of dollars and they can just sell them easily,” Benson noted. “There are obvious numbers to tackle and levels, but the narrative is much more about speed than level. So slow and gradual is fine.”

The dollar index, which measures the greenback against six other currencies, also climbed on Tuesday, topping 101 for the first time in more than two years. It was up 0.2% at 100.96.

The continued rise in US yields provides a boost to the dollar. Benchmark 10-year US Treasury yields hit 2.93% on Tuesday, the highest since December 2018, while yields on US 10-year inflation-linked bonds rose, close to turning positive for the first time in two years.

The greenback also climbed to 0.9492 francs against the Swiss currency, the highest since July 2020. It last changed hands at 0.9482 francs, up 0.4%.

The euro recovered some ground, trading up 0.1% against the dollar at $1.0791, but remained just off last week’s two-year low at $1.0756.

“The policy divergence between the Fed and low-yielding central banks (European Central Bank, Bank of Japan) continues to argue for USD strength,” said Francesco Pesole, FX Strategist at ING.

Inflation in the United States is “far too high,” St. Louis Federal Reserve Chairman James Bullard said on Monday, reiterating his plea for an interest rate hike to 3.5. % by the end of the year. Read more

In the meantime, the BOJ intervened to keep the yield on Japanese 10-year government bonds around 0% and not above 0.25%.

Many investors are betting that the yen will fall further. The latest CFTC data for the week ending April 12 shows that net short positions in the yen are the largest in three and a half years.

Japanese Finance Minister Shunichi Suzuki issued the most explicit warning of the yen’s recent fall on Tuesday, saying the damage to the economy from the weakening currency currently outweighs the benefits. ensue. Read more

The dollar appreciates against the yen

The Aussie dollar rose briefly to US$0.7371 from Monday’s one-month low, supported by minutes released Tuesday of the Reserve Bank of Australia’s April meeting. The minutes suggested the RBA was closing in on raising interest rates for the first time in more than a decade. Read more

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Currency rates at 10:54 a.m. (2:54 p.m. GMT)

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Reporting by Joice Alves in London and Gertrude Chavez-Dreyfuss in New York; Additional reporting by Alun John; Editing by Gareth Jones, Bernadette Baum and Andrea Ricci

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