On Wednesday, the dollar reached new 24-year highs against the yen, surpassing levels that triggered intervention by Japanese policymakers last month, as traders prepared for US inflation data and its implications for additional Federal Reserve rate hikes.
After Bank of England Governor Andrew Bailey reiterating that the institution will terminate its emergency bond-buying programme on Friday, the pound fell to a fresh two-week low. Bailey also instructed pension fund managers to complete position rebalancing by that date.Australian dollars, a risky currency, dropped to a 2.5-year low.
In Asian trading, the dollar gained 0.22 percent to 146.18 yen after reaching a high of 146.39 for the first time since August 1998.The difference in long-term bond yields between the US and Japan is very important for the Japanese yen.
The benchmark 10-year Treasury yield increased overnight to 4.006 percent, on the verge of reaching a 14-year high, while the comparable return on Japanese government bonds is held at or close to zero by the Bank of Japan.On September 22, when the yen dropped as low as 145.90 to the dollar, Japanese authorities carried out their first yen-buying intervention since 1998.
Chief Cabinet Secretary Hirokazu Matsuno stated that officials remained prepared to take the necessary action to thwart excessive currency moves.According to Alvin Tan, head of Asia currency strategy at RBC Capital Markets, “with the overarching strong dollar trend in place, it’s possible that the Bank of Japan would try to slow down the pace of the dollar-increase yen’s by defending at a greater level” than previously.”
