The yen fell to a new 20-year low against the dollar on Monday as searing US inflation data pushed Treasury yields higher, diminishing earlier impetus from speculation that Japanese authorities could intervene to support the currency.
Efforts by central banks to raise interest rates to reduce inflation will remain in focus this week. The Federal Reserve and the Bank of England are expected to raise rates at their meetings and it is possible that the Swiss National Bank will also rise, but little change is expected from the Bank of Japan. The dollar climbed 0.43% on Monday to 135 yen, a 20-year high, and closing in on the 2002 high at 135.20.
The yen briefly rallied on Friday evening as Japan’s government and central bank expressed concern over its recent sharp falls, a rare joint statement seen as the strongest warning yet that Tokyo could step in to support the currency. “Rising overseas yields and energy prices, coupled with continued dovish messages from the Bank of Japan, pushed the USDJPY to two-decade highs,” Barclays analysts said.
They expect the dollar/yen to trade between 131 and 136 this week and noted “there are no clear thresholds above (the 2002 high) other than the round numbers of 136, 137 and 138”. The US benchmark 10-year yield touched 3.2% on Monday morning, after gaining almost 12 basis points on Friday after US inflation beat expectations, raising bets the Fed will have to raise rates even more aggressively . The US two-year yield extended Friday’s gains to hit 3.159% in early trading, a new 14-year high.
Market prices point to about a two-thirds chance of at least 125 basis points of hikes at the next two Fed meetings – Tuesday and Wednesday this week and in July – according to the CME’s FedWatch tool. Barclays analysts said they expected a 75 basis point hike at the Fed’s two-day meeting this week.
Expectations of a more hawkish Fed are pushing the dollar up against more than the yen. The dollar index, which tracks the greenback against six peers, rose 0.3% to 104.52, its highest in four weeks. The euro languished at $1.0483, down 0.3%, and the pound was down 0.32% at $1.2275, taking little support from exceptions, the Bank of England will increase its rate on Thursday, which would be its fifth hike since December.
The Swiss National Bank also meets on Thursday, and a 25 basis point hike is on the cards. The risk-friendly Australian dollar lost 0.6% to $0.6998 in three-and-a-half weeks as fears over the impact of higher rates pushed investors into assets perceived as more sure.
Similarly, bitcoin, which also trades as a risky asset, suffered over the weekend. The world’s largest cryptocurrency was around $26,400, its lowest in a month. A drop past the May low of $25,400 would be bitcoin’s lowest since December 2020.
(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)