FOREX Yen set to see biggest weekly gain in 4 months on US peak rate bets


LONDON, July 29 (Reuters) – The Japanese yen jumped on Friday and is on course for its biggest weekly rise in four months against the dollar on bets that U.S. interest rates are nearing a peak after data showed the world’s largest economy contracted unexpectedly in June. trimester.

Futures markets predict that US interest rates will peak by December this year from June 2023 in early July and that the Federal Reserve will cut interest rates by 50 basis points next year to support the slowdown in growth. [0#FF:]

The result of this rapid decline in rate hike expectations has been a big factor in the dollar’s weakness against the yen, with the greenback collapsing nearly 2.5% against the Japanese unit this week, its biggest weekly decline since late March.

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Against the dollar, the yen climbed 0.8% on Friday to 133.17 yen to its highest levels since mid-June.

The yen has been the main short in the growing interest rate differential trade between the US and its global peers with short bets on the yen, despite a recent pullback, above historical averages at 5.4 trillion. dollars.

“The main trigger for the yen rally was the downward adjustment in US yields reflecting the tightening expectations of policy divergence between the Fed and

BoJ,” Mizuho strategists said in a daily note.

The spread between 10-year US Treasury yields and the equivalent Japanese government debt has narrowed by 70 basis points since early June, amid signs of slowing US growth and rising interest rates. interest pushed Treasury yields lower.

The US dollar was also a bit weaker overall elsewhere on Friday, and the dollar index headed for a second straight weekly loss. It fell 0.5% to 105.680, its lowest since July 5.

But risk appetite has been capped, with the euro struggling to stay above $1.02 levels on fears of the euro zone economy tipping into recession by the end of the month. the year. Read more

Safe-haven currencies, including the Swiss franc, were in demand on Friday.

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Reporting by Saikat Chatterjee; edited by Robert Birsel and Toby Chopra

Our standards: The Thomson Reuters Trust Principles.


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