FILE PHOTO: A U.S. hundred greenback invoice and Japanese 10,000 yen notes are seen on this photograph illustration in Tokyo, February 28, 2013. REUTERS/Shohei Miyano
By Saikat Chatterjee
LONDON (Reuters) – The Japanese yen fell to a recent two-decade low on Wednesday after the Financial institution of Japan stepped into the market once more to defend its ultra-low interest-rate coverage, drawing a pointy distinction with the USA the place Treasury yields hit new highs.
The BOJ once more supplied to purchase limitless quantities of Japanese authorities bonds to test the rise in Japanese 10-year yields, which have been butting in opposition to its 0.25% tolerance ceiling.
In distinction Treasury yields marched to three-year highs whereas inflation-adjusted bond yields hit constructive territory for the primary time since March 2020 as hawkish feedback by policymakers bolstered expectations of aggressive U.S. rate of interest hikes.
The U.S. greenback reached 129.43 yen for the primary time since April 2002 in Asian buying and selling earlier than easing to final commerce 0.21% decrease at 128.615.
It has declined for 13 consecutive classes earlier than Wednesday’s bounce, a dropping streak that in response to Caxton is the largest dropping streak in half a century.
“The 130 is a psychological degree; if we break it (possible) then momentum will possible drive even increased,” mentioned Vasileios Gkionakis, EMEA head of FX G10 Technique at Citibank.
“It is a play on financial coverage divergence with the Fed in tightening mode and the BoJ nonetheless easing.”
The greenback’s rally in opposition to the yen has come as U.S. Treasury yields pushed increased, with 10-year yields touching 2.981% for the primary time since December 2018 in Tokyo buying and selling. Inflation-adjusted U.S. 10-year yields hit 0% in a single day.
“The yen stays the loser of the financial coverage normalisation,” Commerzbank (ETR:) strategists mentioned.
The , which measures the forex in opposition to six main friends together with the yen, early within the day matched Tuesday’s excessive at 101.03 – a degree not seen since March 2020 – earlier than easing to 100.76, down 0.3% within the day.
An index of forex market volatility firmed above 8% however nonetheless properly under 2022 highs of 10% hit in March.