Dollar on the Rise: New Peaks Amid Global Fiscal Worries

The dollar recently reached a 9-1/2-month high against the yen, with European shares and U.S. stock index futures dropping due to equity valuation concerns. Japan's fiscal policies and U.S. economic data are in focus. Analysts expect potential forex intervention, as Japan plans a large stimulus package.

The U.S. dollar has surged to a new 9-1/2-month high against the yen, and slightly edged up against the euro, as investors remain cautious about Japan's fiscal stance. European share markets dipped on Tuesday, paralleled by a decline in U.S. stock index futures amid anxiety over inflated equity valuations.

The dollar index climbed 0.05% to 99.59, post-recovery from a previous four-day loss streak. Switzerland's franc held steady against both the dollar and the euro. Despite earlier hitting its lowest mark since February, the yen rose slightly to 155.42 per dollar. Japan's potential policy shifts spark debate, as Prime Minister Sanae Takaichi and Bank of Japan Governor Kazuo Ueda diverge on future strategies.

Barclays suggests maintaining a long position on the dollar against the yen, projecting increased fiscal expenditure would exacerbate Japan's debt. Concerns are growing over Japan's expansive spending plans, which could raise bond yields, while analysts warn of possible forex interventions to manage a strong dollar. The focus now shifts to U.S. data and its potential influence on the Federal Reserve's rate decisions.

(With inputs from agencies.)