Bloomberg News reported on the 5th (local time) that as U.S. government bond yields (market interest rates) hit a 16-year high, bets on the strength of the dollar are increasing in the international financial market.

The yield on the 10-year U.S. Treasury bond benchmark has surpassed 4.8%, hitting a 16-year high. Accordingly, Bloomberg reported that foreign exchange traders on Wall Street are betting heavily on the strength of the dollar.

Although uncertainty about stock and bond prices is increasing, a consensus is forming on Wall Street that the dollar will continue to strengthen.

Accordingly, the weakening of other currencies is expected to be inevitable, with the yen falling to its lowest level since the bursting of the real estate bubble in the 1980s.

While the U.S. economy remains strong despite high interest rates, the economies of other regions, such as China and Europe, are slowing.

The dollar has been rising rapidly since mid-July as the U.S. economy showed signs of strength and there were increasing expectations that the Federal Reserve would continue high interest rates until next year.

An employee is sorting out U.S. dollars at the counterfeit and alteration response center of Hana Bank in Jung-gu, Seoul. 2023.8.17/News 1

Many investors predicted at the beginning of the year that the Federal Reserve would continue to aggressively raise interest rates since last year, leading to a decline in the U.S. economy and a weakening dollar.

However, despite the Federal Reserve’s aggressive interest rate hikes, the U.S. economy remains robust. Accordingly, as the dollar began to strengthen, foreign exchange traders on Wall Street recently began placing full bets on the strength of the dollar.

By Tuesday, foreign exchange traders had pushed long bets on the dollar to their highest since June, according to data from the Commodity Futures Trading Commission. In comparison, short (sell) bets fell to their lowest level since October of last year. Forex traders are betting heavily on the strength of the dollar.

Accordingly, Goldman Sachs predicted that the euro could fall to $1.02 per euro by the end of the year, and the yen could fall to 155 yen per dollar. If the yen exchange rate falls to 155 yen per dollar, it will be the first time since the collapse of Japan’s real estate bubble in the 1980s.

If the yen falls, other Asian currencies, such as the won, are bound to fall as well.

Source: Donga