Rising US Treasury yields weigh on Japanese yen

9 Apr 2024 , 09:47 AM

Although a jump in U.S. Treasury yields did not provide the dollar with a significant boost, it did keep pressure on the yen, which was hovering around multi-decade lows and had traders on the lookout for any signals of intervention. As a result, the dollar was hesitant on Tuesday.

The dollar gained 0.03% to 151.87 yen, staying close to the 34-year peak of 151.975 yen reached last month as jawboning efforts by Japanese officials to support the currency increased.

Reiterating his warning that Tokyo is prepared to take action against the currency's recent strong drops, Finance Minister Shunichi Suzuki stated on Tuesday that authorities won't rule out any alternatives in dealing with excessive yen swings.

Even as U.S. Treasury rates, which the dollar/yen pair typically tracks closely, rise, the fear of Tokyo intervention has prevented the dollar from breaking through the eagerly anticipated 152 yen barrier.

The New Zealand dollar gained 0.15% to $0.6041 on the open market, eclipsing a private think tank study that revealed the nation's business confidence declined in the first quarter due to various challenges encountered by companies.

A two-week high was nearly reached by the euro as it held steady at $1.0860, while sterling added 0.04% to $1.2658.

The dollar has not gained much traction despite an increase in U.S. Treasury yields as traders reevaluate their expectations on the rate cuts and their magnitude, which the markets have priced in for later this year.

With respect to a group of currencies, the US dollar remained close to its two-week low of 104.13.

This occurs concurrently with the two-year Treasury yield reaching a four-month high of 4.8010% on Tuesday, and the benchmark 10-year yield remaining close to a four-month top at 4.4278%.

Futures currently indicate that the Fed will likely ease by 60 basis points this year, as investors become less certain that the easing cycle will start in June.

In other news, the Australian dollar dropped 0.01% to $0.6604 and the offshore market saw the Chinese yuan trade at 7.2437 per dollar.

Despite the central bank's tougher daily benchmark settings, the yuan has steadied this week, partly due to a recent run of positive Chinese economic data. However, the currency is still just slightly above its 4-1/2 month low of 7.2364, which it hit on April 3. This year, it is down 1.8%.

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