Image: Reuters Berita 24 English - The yen sank to a new 20-year low versus the dollar on Monday, as red-hot U.S. inflation data pushed up T...
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| Image: Reuters |
Berita 24 English - The yen sank to a new 20-year low versus the dollar on Monday, as red-hot U.S. inflation data pushed up Treasury yields, offsetting the previous lift from rumours Japanese authorities could intervene to strengthen the currency.
This week's focus will continue on the attempts of central banks to increase interest rates to combat inflation. The Federal Reserve, the Bank of England, and maybe the Swiss National Bank are anticipated to raise interest rates at their upcoming meetings, although the Bank of Japan is not anticipated to alter its monetary policy.
On Monday, the dollar rose 0.43 percent to 135 yen, a 20-year high, and drew closer to the 2002 high of 135.20.
Japan's government and central bank expressed alarm over the currency's recent severe declines, issuing a rare joint statement that was viewed as the strongest indication to date that Tokyo could intervene to defend the yen.
"Rising overseas rates and energy prices, along with the Bank of Japan's ongoing dovish comments, have driven USDJPY to two-decade highs," Barclays analysts said.
They anticipate dollar/yen to trade between 131 and 136 this week and observe that "there are no apparent thresholds above (the 2002 high) other than the round numbers 136, 137, and 138."
On Monday morning, the benchmark 10-year U.S. yield reached 3.2 percent, after gaining about 12 basis points on Friday as a result of U.S. inflation that exceeded expectations and fueled wagers that the Fed will have to raise rates even more swiftly.
The U.S. two-year yield extended Friday's advances to reach a 14-year high of 3.159 percent during early trading on Monday. [US/]
According to the CME's FedWatch tool, market pricing shows a nearly two-thirds possibility of at least 125 basis point hikes at the Fed's next two sessions, on Tuesday and Wednesday this week and in July.
This week's two-day meeting of the Federal Reserve is anticipated to result in an increase of 75 basis points, according to analysts from Barclays.
The dollar appreciates versus currencies other than the yen due to expectations of a more aggressive Fed. The dollar index, which measures the value of the greenback relative to six other currencies, rose 0.3% to 104.52, its highest level in four weeks.
The euro was languishing at $1.0483, down 0.3%, and sterling was 0.3% lower at $1.2275, with little help from expectations that the Bank of England will raise rates on Thursday, which would be its fifth increase since December.
The Swiss National Bank is expected to raise rates by 25 basis points when it meets on Thursday.
The risk-friendly Australian dollar lost 0.6% and reached a three-and-a-half-week low of $0.6998 as investors sought perceived safer assets out of concern for the impact of increased interest rates.
Bitcoin, which trades similarly to a risky asset, also saw losses over the weekend.
The largest crypto currency in the world was trading near $26,400, its lowest level in a month. A decline beyond May's low of $25,400 would mark the lowest price for bitcoin since December 2020.
