Dollar nears 3-year high against yen as markets retain bets on Fed taper
The dollar rose to its highest in nearly three years versus the yen on Monday as investors remained confident the U.S. Federal Reserve will announce a tapering of its massive bond-buying next month despite softer U.S. payrolls figures.
That jobs data released on Friday pushed U.S. bond yields higher, and so the yen, which is known to be most sensitive to yield differentials, slipped to as low as 112.725 yen per dollar in Asian hours on Monday - a level last seen in December 2018.
The dollar could rise to around 113 yen. But to extend its gains further to 114 yen would require a much larger rise in the 10-year U.S. Treasuries to nearly 2%, which I don’t think likely at this stage,” said Jun Arachi, senior strategist at Rakuten Securities.
The Japanese currency was also hurt by a slight tilt towards riskier currencies as sterling and the Australian dollar both gained slightly on the greenback, leaving the dollar’s index little changed at 94.154, not far from its one-year high of 94.504 touched earlier this month.
U.S. currency and fixed income markets are closed on Monday for a holiday but benchmark 10-year Treasuries yield hit a four-month high of 1.617% on Friday, even after data showed the U.S. economy created the fewest jobs in nine months in September, significantly underperforming economists’ forecasts.
The Chinese yuan was little moved by the ongoing travails of Chinese developer China Evergrande Group, even as offshore bondholders brace for news on more than $148 million in looming bond coupon payments after the company missed two coupon deadlines last month.
The offshore yuan was last at 6.4370 per dollar towards the top end of its recent range, but still short of its high of 6.422 hit in September.
The British pound held firmer at $1.3634, extending its recovery from a nine-month low set late last month, on growing expectations that the Bank of England could raise interest rates to curb soaring inflation.
On the other hand, the euro was soft at $1.1575, hovering a tad above its Wednesday’s low of $1.1529, its weakest level since July last year.
In cryptos, bitcoin gained 3.5% to a new five month high of $56,576 extending gains over the weekend, ether also gained 3% to softer at $3,528.
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