Hawkish Powell pushes yen past 120 barrier

Author of the article: 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%…
Hawkish Powell pushes yen past 120 barrier

Author of the article:

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

Previous Change

Session

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

Euro/Yen

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

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Tom Westbrook; Editing by Himani Sarkar)

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