FOREX-Yen to snap record losing streak on intervention worries; the euro jumps


Band Saikat Chatterjee

LONDON, April 20 (Reuters)The Japanese yen briefly fell to a new two-decade low on Wednesday after the Bank of Japan again intervened in the market to defend its ultra-low interest rate policy, creating a stark contrast to the United States where bond yields reached new highs.

But Japanese unity rebounded in London as heightened nervousness over a verbal intervention and growing speculation around an impending bilateral meeting between US Treasury Secretary Yellen and her Japanese counterpart prompted traders to cut some bets. short.

However, positioning in derivatives JPY1MRR= and currency futures JPYNETUSD= suggest that yen weakness has more room to maneuver.

The BOJ again offered to buy unlimited amounts of Japanese government bonds to curb the rise in Japanese 10-year yields, which were hitting its 0.25% tolerance cap.

In contrast, Treasury yields US10YT=RR hit three-year highs while inflation-adjusted bond yields US10YTIP=RR reached positive territory for the first time since March 2020 as hawkish comments from policymakers bolstered expectations of aggressive U.S. interest rate hikes.

The US dollar reached 129.43 yen JPY=EBS for the first time since April 2002 in Asian trading before slowing to trade for the last time down 0.9% at 127.82.

“The 130 is a psychological level; if we break it (probably), the momentum will likely drive USDJPY even higher,” said Vasileios Gkionakis, EMEA head of G10 FX strategy at Citibank.

“This is a game of monetary policy divergence with the Fed in tightening mode and the BoJ still easing.”

The dollar’s rally against the yen came as US Treasury yields rose, with 10-year yields US10YT=RR touching 2.981% for the first time since December 2018 in Tokyo trading. US 10-year inflation-adjusted yields hit 0% overnight.

“The yen remains the loser from monetary policy normalization,” Commerzbank strategists said.

Elsewhere, the euro was the other big winner in London after media reports that some ECB policymakers were expecting a first rate hike as early as July. The single currency EUR=EBS rose 0.6% to $1.0853.

The dollar index =USDwhich measures the currency against six major peers, including the yen, hit Tuesday’s high of 101.03 early in the day – a level not seen since March 2020 – before falling back to 100.38, down from 0.6% during the day.

A currency market volatility index .DBCVIX firmed above 8% but still well below the 2022 highs of 10% reached in March.

Offshore Chinese Currency CNH=EBS was the other big loser, with the unit falling 0.4% to 6.44 yuan to the dollar.

World exchange rates

(Reporting by Saikat Chatterjee; Editing by William Maclean and Chizu Nomiyama)

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