Yen Tries to made notable gains in Asian trade on Thursday, reversing its recent downward trend against a basket of major rivals. This rebound marked the yen’s first profit in three sessions against the US dollar
as the currency attempted to recover from four-week lows. The key driver behind this uptick was a significant rise in Japanese 10-year treasury yields
which reached their highest level in 13 years.
Yen and the USD/JPY Pair
The USD/JPY pair fell by 0.25% to 157.26, with a session high of 157.67. On Wednesday, the yen had lost 0.3% against the dollar, hitting a four-week low at 157.71 yen per dollar. The current movement highlights the yen’s efforts to regain ground amid shifting economic indicators.
Japanese Treasury Yields
Japanese 10-year treasury yields spiked by 1.85% on Thursday, reaching a 13-year peak at 1.104%. This surge in yields has provided strong support for the yens
driven by expectations that the Bank of Japan (BOJ) might reduce its purchases of government bonds at its upcoming June meeting.
US Treasury Yields
Meanwhile, US 10-year treasury yields continued to hover near a four-week high of 4.638%
as markets awaited more critical data to gauge the future path of US monetary policies. The upcoming US GDP growth data and unemployment claims figures are particularly anticipated.
Yield Gap
The yield gap between US and Japanese 10-year government bonds has stabilized around 340-350 basis points in favor of the US. This is the narrowest such gap since 2020, reflecting changing dynamics in global bond markets and influencing currency valuations.
Japanese Authorities’ Moves
Japanese policymakers are increasingly focusing on structural economic changes to support the yens in the forex market, acknowledging the limited impact of direct intervention. Recent data expected on Friday is likely to reveal that Japan has spent nearly 9 trillion yens in recent weeks to mitigate the yen’s decline
which had plumbed a 34-year low against the dollar at 160 yens per dollar.
Conclusion
The yen’s recent performance underscores the significant impact of domestic treasury yields and broader economic policies on currency values. As Japanese yields hit new highs and the BOJ considers scaling back bond purchases, the yen is finding some support. However
the yield gap with US treasuries and the broader economic outlook will continue to play crucial roles in determining the yen’s trajectory.
FAQs
Why did the yen rise against the US dollar? The yen rose due to a significant spike in Japanese 10-year treasury yields
which reached a 13-year high
bolstering the currency.
What is the impact of Japanese treasury yields on the yen? Higher Japanese treasury yields make yen-denominated assets more attractive
supporting the yen’s value in the forex market.
How does the yield gap between US and Japanese bonds affect the yen? A smaller yield gap makes yen-denominated assets relatively more attractive
supporting the yen
while a wider gap favors the US dollar.
What are the expectations for the Bank of Japan’s policy moves? Markets expect the Bank of Japan to reduce its purchases of government bonds
which could further support rising yields and the yen.
How much has Japan spent to support the yen? Japan is expected to have spent nearly 9 trillion yen recently to slow the yen’s decline
reflecting significant intervention efforts.