Dollar hits 6-year high vs yen as BOJ moves against rising bond yields
NEW YORK, March 28 (Reuters) - The dollar hit a six-year
high versus the yen after the Bank of Japan moved to contain
rising bond yields, while U.S. Treasury yields soared to new
multi-year highs, highlighting a divergence between the BOJ and
other major central banks.
Treasury 10-year yields vaulted above 2.5% to three-year
highs, with the U.S. Federal Reserve expected to
deliver a half-point interest rate rise in May as it tackles
rising inflation, having kicked off its tightening cycle this
"We now expect the FOMC to hike by 50 bps at the next two
meetings before shifting back to a 25-bps-per meeting cadence
for the reminder of the year," said Michael Gregory, deputy
chief economist at BMO Capital Markets Economics.
Interest rate hike expectations helped lift the dollar to
its highest in two weeks against a basket of six major
peer currencies, last up 0.313% at 99.158, at 3:20 p.m. Eastern
Standard Time (1920 GMT).
Against the yen, the dollar surged as much as 2.5%
to its highest level since August 2015 and the biggest one-day
rise since March 2020. Yen losses in March surpass 7% and the
currency is set for its biggest monthly and quarterly falls
since 2016. The dollar was last up 1.34% against the Japanese
currency at 123.715 yen.
Struggling to swim against the tide lifting interest rates
higher globally, the BOJ staunchly defended its 0.25% yield cap
on Monday by offering to buy an unlimited amount of government
bonds (JGBs) for the first four days of this week.
While that did not stop 10-year yields hitting the upper
limit of the BOJ's policy band, it sent the yen spiraling.
"On net, JGBs mostly shook off what was just a repeated
gesture to defend the 10-year yield ceiling but the signal
toward expanding money supply contributed to yen softness
alongside the more dominant Federal Reserve effects on the
dollar," said Derek Holt, head of capital markets economics at
Big energy import bills and the loss of tourism revenues
mean "the weight on the yen is likely to remain for the next
year," said Colin Asher, senior economist at Mizuho.
The Japanese currency also lost ground against the euro,
which is increasingly underpinned by expectations the European
Central Bank will join the rate hike club this year.
The euro gained 1.27% to 135.895 yen, a four-year high.
The euro edged up 0.03% against the greenback to 1.0984
. The single currency's fortunes this week could be
determined by inflation figures from major European economies,
with the bloc's harmonized HICP inflation seen edging up to 6.5%
Analysts at Monex said given the yen's weakness and risks to
the euro from the Ukraine-Russia conflict, the dollar would
likely stay buoyant, especially if Friday's jobs data proved
"Should wage growth continue to tick up despite the recent
increase in labor supply, money markets are likely to fully
price two 50 bp hikes from the Fed in May and June," they added.
In commodity currencies, the Australian dollar
dipped 0.33% to $0.74895, but was not far off its recent
In cryptocurrencies, bitcoin rose 2.53% to a
year-to-date high of $48,050.90.
It bitcoin holds above $47,000, it could be in for a major
breakout, said Edward Moya, senior analyst at Oanda.
"Once bitcoin crosses the $50,000 level, that should trigger
further retail and institutional interest," he said.
(Reporting by John McCrank in New York; additional reporting by
Sujata Rao and Dhara Ranasinghe in London; Editing by Jonathan
Oatis and Alison Williams)