The dollar hit a one-week high against the yen on Wednesday (28th), boosted by a jump in U.S. bond yields and the Bank of Japan’s reiteration of its continuation of its ultra-loose monetary policy.
In late U.S. trade, the ICE U.S. Dollar Index (DXY), which tracks the greenback against six major currencies, was up 0.34% at 104.53. By the time of writing, the 10-year U.S. bond yield rose to 3.883%, the highest since mid-November.
The dollar rose 0.7 percent against the yen to 134.45 yen, the highest since Dec. 20, when the Bank of Japan (BOJ) unexpectedly raised the cap on 10-year government bond yields, sending the dollar to its biggest one-day drop against the yen in 24 years. The move fueled speculation that the BOJ would eventually withdraw its stimulus measures.
However, according to the minutes of the Bank of Japan’s latest meeting released on Wednesday, policymakers denied that adjusting the yield ceiling represented a change in policy trajectory, and reiterated that they would continue to maintain ultra-loose monetary policy. The news drove the yen down.
“If Japanese government bond yields hold steady, the BoJ may not be under pressure to ‘take further action,'” said Greg Anderson, global head of FX strategy at BMO Capital Markets. Small technical adjustments, we’ve done that before.”
The event that disturbed market sentiment in the last week of this year was China’s rapid removal of the zero-zero policy that has severely suppressed its economic development for nearly three years. As consumers and businesses slowly return to normal, they also have to deal with the impact of a surge in infection numbers.
The offshore yuan fell 0.5% to 6.9986 per dollar on Wednesday.
In commodity currencies, the Australian dollar edged up 0.1 percent to $0.6738, paring earlier gains, while the New Zealand dollar rose more than 0.5 percent to $0.6311.
Brad Bechtel, head of global foreign exchange at Jefferies, believes that commodity currencies have only responded to the recent trend in oil prices, and that’s all, but there may be room to strengthen.
The euro fell nearly 0.3 percent to $1.0610, having stabilized near six-month highs in recent weeks since European Central Bank (ECB) President Christine Lagarde stressed the need to keep raising interest rates.
After returning to trading after the Christmas holiday, the pound rose as much as 0.8% against the dollar in the intraday session, before paring back, slightly down 0.05% to $1.2017 by the time of writing.
As of about 6:00 Taiwan time on Thursday (29th) Price:
The dollar index was at 104.5292. +0.3203% The euro was trading at 1.0611 dollars against the dollar (EUR/USD). -0.2726% GBP/USD was trading at 1.2018. -0.0914% The Australian dollar traded at 0.6736 AUD/USD. +0.0297% The U.S. dollar was trading at 1.3608 Canadian dollars to the U.S. dollar. +0.6360% USD/JPY is trading at 134.45 yen per dollar. +0.7116%