Dollar at 24-year high against yen as US yields jump; sterling on the strings
By Kevin Buckland
TOKYO (Reuters) – The dollar hit a fresh 24-year high against the yen on Wednesday, topping levels that prompted Japanese authorities to intervene last month as traders braced for U.S. inflation data and its impact on further Federal Reserve rate hikes.
The pound slid to a new two-week low after Bank of England Governor Andrew Bailey reiterated that the central bank would end its emergency bond-buying program on Friday and asked pension fund managers to complete the rebalancing of their positions within this timeframe.
The risk-sensitive Australian dollar hit a 2.5-year low.
The dollar strengthened 0.3% to 146.30 yen in Asian trading, after hitting 146.35 yen, a level not seen since August 1998.
The Japanese currency is particularly sensitive to the spread between US and Japanese long-term bond yields. The benchmark 10-year Treasury yield hit a 14-year high overnight at 4.006%, while the equivalent yield on Japanese government bonds is pinned near zero by the Bank of Japan .
Japanese officials staged their first yen buying intervention since 1998 on September 22, when the yen fell to 145.90 to the dollar.
Japanese Finance Minister Shunichi Suzuki said on Wednesday that authorities would take necessary measures in the foreign exchange market if necessary, adding that what was important was the speed of currency movements, the Jiji Press news agency reported. .
“It is the speed of change rather than the level that will trigger FX intervention, (i.e.) USD/JPY may rise above its pre-intervention level of 145 .9 without triggering BoJ intervention if the rise happens gradually,” Joseph Capurso, a currency strategist at Commonwealth Bank of Australia, wrote in a client note.
Meanwhile, Thursday’s U.S. consumer price report could trigger the kind of sharp move that would prompt another intervention, Capurso added, “but we maintain that any intervention-induced movement on the USD/JPY will be canceled in a few weeks.”
The Fed has signaled it will continue its aggressive tightening campaign to contain inflation, and recent strong reports from the US labor market have shattered some market participants that policymakers may slow the pace of rate hikes.
Cleveland Fed Chair Loretta Mester backed that view on Tuesday, saying the U.S. central bank had yet to get the surge in inflation under control and should continue with rate hikes.
The US dollar index – which measures the greenback against a basket of six major peers including the yen, pound and euro – edged up 0.16% to 113.52, after touching the highest since September 29 at 113.54.
The pound slid 0.13% to $1.0947 and earlier touched $1.09385, marking a new low since September 29, following comments from the BoE governor.
Yields on gilts soared on Tuesday, boosting yields in the United States and elsewhere.
The euro fell to its weakest level since September 29 overnight at $0.9670 and remained not far from that level, trading 0.17% lower than Tuesday’s close at 0, $96885.
Fears that continued aggressive policy tightening by the Fed and most of its peers could drive the global economy into recession continue to weigh on risk sentiment.
Investors will look for further clues when inflation data for September is released on Wednesday for the prices sellers are getting for their goods, and Thursday for the prices consumers are paying for their purchases.
The Aussie fell to $0.62395, a level last seen in April 2020, and last traded 0.5% lower at $0.62415. The New Zealand dollar was down 0.21% at $0.5570, approaching the previous day’s low of $0.5536, a level not seen since March 2020.
(Reporting by Kevin Buckland; Editing by Shri Navaratnam)
