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A recent report shows that in the G-10 currency group, the euro and the Japanese yen have seen significant declines against the US dollar. The euro’s political turmoil and the BOJ’s policy woes have contributed to this decrease. The US dollar index has reached its highest level this year, indicating a strong position for the dollar. The Japanese yen also weakened significantly against the US dollar to a level not seen in 38 years.
The euro is expected to continue its decline, particularly due to French political uncertainties. The upcoming French parliamentary elections may bring more shocks, potentially leading to economic instability. If the far-right National Rally party wins, financial uncertainties are expected. The spread between interest rates in the US and the eurozone is widening, encouraging a carry trade in the US dollar against the euro.
The Japanese yen may continue to devalue as the BOJ struggles to strengthen its currency. The wide spread in interest rates between Japan and other major central banks is likely to keep investors holding onto higher-yielding currencies like the US dollar. The focus for the week will be on the US Personal Consumption Expenditure data for May, expected to show a slight decrease in inflation.
Overall, the foreign exchange markets remain volatile, with the US dollar in a strong position due to the Fed’s policies and a stable economy. Both the euro and the Japanese yen face challenges that may continue to weaken their positions against the US dollar.
Source
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