By Brigid Riley
TOKYO The dollar reached fresh 11-month highs on Tuesday, pushing the yen down closer to a potential intervention zone, after strong U.S. economic data bolstered the view that the Federal Reserve will keep interest rates higher for longer.
The euro and sterling also traded at new multi-month lows against the dollar, with the euro dropping below January's 1.0482 nadir.
The Australian dollar slipped to an 11-month low following the Reserve Bank of Australia's (RBA) decision to hold rates, while Russia's rouble weakened past the symbolic threshold of 100 to the dollar before recovering slightly in early trade.
U.S. manufacturing took a step further towards recovery in September as production picked up and employment rebounded, according to a survey on Monday that also showed prices paid for inputs by factories falling considerably.
The dollar index rose as high as 107.19, its best since November 2022, before slipping down slightly to 107.18.
A batch of strong U.S. economic data over recent weeks has strengthened expectations that the Fed will keep rates elevated for a longer period, with several policymakers warning of the risk of more tightening if inflation does not keep slowing as expected.
U.S. Treasury yields have also given the dollar a boost, surging on the upbeat data release, as well as the last-minute deal that averted a government shutdown.
The selloff of U.S. Treasury bonds is the "talking point" of financial markets, said Carol Kong, economist and currency strategist at Commonwealth Bank of Australia, and a trend that likely will continue as long as U.S. economic data remains strong.
"(Tuesday's) U.S. JOLTS job openings and non-farm payrolls on Friday can be a catalyst to push up U.S. yields and the USD if they surprise to the upside," she added.
The rally in the dollar has put further pressure on the yen, pushing it closer to the psychologically significant 150-level that markets view as a line in the sand for Japanese authorities that could spur intervention.
The yen was last at 149.915 against the dollar, just off Tuesday's fresh low of 149.93.
Although Japanese officials have stated "that the government is not watching any particular level ... interventions had previously occurred around 150, signifying official discomfort when the JPY weakens beyond this point," said Wei Liang Chang, FX and Credit Strategist at DBS Bank.
Japanese Finance Minister Shunichi Suzuki said on Tuesday authorities were watching the currency market closely and stood ready to respond, repeating a warning against speculative moves that did not reflect economic fundamentals.
Elsewhere, the euro hit a fresh low of $1.04595, the lowest since December last year, after a survey of euro zone PMI showed on Monday that demand kept shrinking at a pace rarely surpassed since the data was first collected in 1997.
Sterling also extended losses in the Asian afternoon, falling as low as $1.2061.
The Aussie dropped more than 0.7% to $0.63135 after Australia's central bank met market expectations and held rates steady at its monetary policy meeting.
Attention now turns to quarterly consumer price data out later this month, said Kyle Rodda, senior financial market analyst at Capital.com.
"If that number indicates inflation is tracking towards 4% by year-end, then the RBA will likely stick to the sidelines."
The New Zealand dollar was last around 0.7% lower at $0.5908 ahead of the Reserve Bank of New Zealand's rate decision on Wednesday.
(Reporting by Brigid Riley; additional reporting by Kevin Buckland; Editing by Shri Navaratnam and Jamie Freed)
