SINGAPORE — The yen fell through the
psychological 120 level for the first time since 2016 on
Tuesday, after a hawkish speech from Federal Reserve Chair
Jerome Powell raised bets on higher U.S. interest rates and
widened the policy gap on a dovish Bank of Japan.
The yen fell about 0.4% to briefly hit 120.08 per
dollar in early Asia trade. It is down about 4% this month as
leaping U.S. yields have lured flows from Japan.
“Widening policy divergence is continuing to push the yen to
more deeply undervalued levels against the U.S. dollar,” MUFG
currency analyst Lee Hardman said.
The dollar was broadly stronger elsewhere and pushed the
euro down 0.2% to $1.0992.
U.S. bonds and interest-rate futures took a further flogging
overnight after Powell said policymakers needed to move
“expeditiously” and put the possibility of 50-basis point (bp)
rate hikes on the table.
Fed funds futures moved to price in an almost 2/3
chance of a 50 bp hike in May and now anticipate the benchmark
rate – currently below 0.5% – exceeding 2.5% in 2023.
Benchmark 10-year yields rose 14 bps and, at
2.0914%, the gap on anchored 10-year Japanese yields is the
widest in more than 2-1/2 years.
The moves lent broad strength to the dollar elsewhere, as
have nerves about the intensifying war in Ukraine which is
lifting oil prices back toward early-month highs.
The Australian dollar was also softer at $0.7386,
as was the kiwi at $0.6873.
The U.S. dollar index rose 0.2% to 98.700. Sterling
eased 0.2% to $1.3144.
In offshore trade, the Chinese yuan was at 6.3739
to the dollar, having pulled back from recent highs and settled
in a new range as investors await promised monetary easing.
Although the Chinese central bank left 1-year and 5-year
loan prime rates unchanged … on Monday, we still expect the
(People’s Bank of China) to lower the reserve ratio requirement
by 50 bp again, as early as Q1 2022,” Scotiabank strategist Qi
Gao said. “We maintain our short USD/CNH spot position.”
Currency bid prices at 0106 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Euro/Dollar $1.0992 $1.1016 -0.21% +0.00% +1.1026 +1.0981
Dollar/Yen 119.8800 119.4850 +0.32% +0.00% +120.0350 +119.4600
Dollar/Swiss 0.9354 0.9337 +0.27% +0.00% +0.9362 +0.9335
Sterling/Dollar 1.3143 1.3169 -0.18% +0.00% +1.3172 +1.3133
Dollar/Canadian 1.2600 1.2597 +0.02% +0.00% +1.2603 +1.2589
Aussie/Dollar 0.7387 0.7400 -0.18% +0.00% +0.7402 +0.7377
NZ 0.6873 0.6886 -0.17% +0.00% +0.6886 +0.6864
Tokyo Forex market info from BOJ
(Reporting by Tom Westbrook; Editing by Himani Sarkar)
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