The yen yesterday was heading to its first weekly gain in more than a month after Japanese authorities intervened in markets to support the yen for the first time since 1998, while a towering US dollar kept other currencies pinned near multi-year lows.
The yen was up about 0.1 percent at ￥142.22 per US dollar in Asia, after a more than 1 percent rally in the previous session on news that Japan had bought yen to defend the battered currency, although trading yesterday was thin with the country’s markets closed for a public holiday.
The intervention, conducted late in Asia trading hours on Thursday, came after the Bank of Japan stuck with its ultra-low rate policy, which prompted a drop in the yen past ￥145 per US dollar to a 24-year low.
“Given that (the central bank) runs ... against the grain of rising interest rates, in order to have any chance of success, they’re going to have to be in this for the long haul,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank. “My sense is that the law of diminishing returns will set in, as far as intervention is concerned.”
The pound lost 0.27 percent to US$1.12285, uncomfortably close to a 37-year low of US$1.1213 in the previous session and little helped by a 50 basis-point rate hike by the Bank of England overnight.
The euro, the Australian dollar and the New Zealand dollar were likewise languishing near fresh lows in the face of a surging greenback, which received a boost from a very hawkish US Federal Reserve policy announcement and rising US Treasury yields that kept the US dollar in demand.
The benchmark 10-year Treasury yield hit an 11-year high of 3.718 percent overnight, while the two-year yield remained well above 4 percent.
“Ironically, I do think that the rise in US Treasury yields overnight, particularly the 10-year area, is a direct result of the view that the Bank of Japan is going to have to be selling Treasuries, to supply the dollars in order to intervene,” Attrill said. “Outside of dollar/yen, it will make the dollar even more attractive against other currencies.”
The US dollar index rose 0.16 percent to 111.40, hovering near a two-decade high of 111.81 hit in the previous session, and is on track for a weekly gain of 1.5 percent.
The euro fell 0.11 percent to US$0.9823, close to a 20-year trough of US$0.9807 hit overnight.
This month’s flash purchasing managers’ indices for the eurozone, the UK and the US, due later yesterday, were expected to provide a better overview regarding the darkening global outlook.
The risk-sensitive Australian dollar dropped 0.38 percent to US$0.66165, while the New Zealand dollar fell 0.31 percent to US$0.5828. The two currencies fell to their lowest since 2020 in the previous session.
Westpac chief economist Bill Evans said in a note that he has lowered his forecast for the Australian dollar to US$0.65 by the end of this year, from US$0.69 previously.
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