Dollar hits one-year high; yen nears 40-year low

The U.S. dollar hovered near its strongest level in a year on Tuesday, supported by expectations that the Federal Reserve will keep interest rates high for longer. The yen, meanwhile, weakened to levels not seen in four decades, raising concerns about the cost of imports and the health of Japan’s economy. The dollar’s strength comes as Fed officials signal a “hawkish” stance—meaning they plan to keep borrowing costs high to fight inflation. This makes the dollar more attractive to investors, pushing its value up against other currencies. For Japan, the yen’s slide near a 40-year low is a problem. A weaker yen makes Japanese goods cheaper for foreign buyers, but it also makes imports—like energy and food—more expensive for Japanese consumers. The Bank of Japan has kept its own interest rates very low, which has widened the gap with U.S. rates and pressured the yen further. Traders are watching for possible intervention by Japanese authorities to support the yen, but so far no action has been taken. The dollar index, which measures the greenback against a basket of major currencies, remained near its highest point since late 2023.