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Dollar vaults to nearly 3-year high vs yen on central bank divergence

The dollar soared to its highest in nearly three years versus the Japanese 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.

Traders shrugged off Friday’s mostly lacklustre jobs report, pushing U.S. bond yields higher. The yen, which is known for being particularly sensitive to interest rate differentials, hit 113 yen per dollar for the first time since December 2018 in morning London trade.

The Japanese currency was also hurt by a slight tilt towards riskier currencies, with the Australian dollar gaining on the greenback, as oil prices hit multi-year highs on the back of the energy crisis griping major economies amid a pick-up in economic activity.

 

Overall, the dollar index, which measures the greenback against a basket of peers, was up 0.054% at 94.215, not far from its one-year high of 94.504 touched earlier this month.

U.S. fixed income markets are closed on Monday for a holiday but the yield on benchmark 10-year Treasuries 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, missing forecasts.

The British pound held firmer at $1.3627, extending its recovery from a nine-month low set late last month, on growing expectations the Bank of England could raise interest rates to curb inflation.

Reference: CNBC