Dollar Holds Near Seven-Week Highs as Yen Slides for Third Day and Sterling Weakens

The U.S. dollar remained firm near seven-week highs on September 22, underpinned by expectations that the Federal Reserve will continue raising interest rates, putting broad pressure on major and emerging market currencies. The yen bore the sharpest strain, falling for a third consecutive session with USD/JPY rising 0.3% to 157.75 and pushing toward the 158.00 level near its 50-day exponential moving average, a move that analysts flagged as raising intervention risks from Japanese authorities.

Sterling came under separate pressure, with GBP/USD struggling above 1.3350, around a six-week low, after data showed UK public sector net borrowing ran higher than expected in the first five months of the fiscal year. Against the euro, the pound held in a tight range with the euro slipping 0.1% to 0.8568 pounds, though ING warned sterling could fall further if markets reprice Bank of England rate-rise expectations, forecasting the euro could reach 0.87 pounds on that scenario.

Elsewhere, the Canadian dollar weakened as USD/CAD bulls retained control near mid-1.4000s, close to August 6 highs. The Australian dollar held support around the 38.2% Fibonacci retracement level near 0.7100, while NZD/USD faced resistance at 0.5800. Asian currencies were broadly mixed as the firmer dollar and yen weakness on intervention concerns set the tone. ING also noted that a fair value drop in the euro pointed to further downside for EUR/USD.