The yen depreciates as the BOJ intervenes to reduce bond yields

HONG KONG / TOKYO, March 28 (Reuters) – The Japanese yen fell nearly 1% to a six-year low on Monday, with the Bank of Japan intervening to stop government bond yields from rising above its main target. The dollar is also higher against other currencies.

The BOJ, which has repeatedly stated its commitment to keeping monetary policy loose, on Monday offered two concessions on the purchase of unlimited government bonds with a maturity of more than five years and up to 10 years. The central bank aims to stop raising Japanese yields and raising global interest rates.

The dollar was up approximately 0.95% at 123.25 yen, the highest level since December 2015. It is up 7% so far in March, its biggest monthly gain in five years.

“The market sees the monetary policy difference between the US and Japan as the main driver of the dollar, so contrary to recent hockey Fed comments, (the BOJ’s move) gives the impression that the BOJ is worse, and that this leads to a higher dollar-yen at Barclays in Tokyo.” Said senior currency strategist Shinichiro Kododa.

“I think the risk will be even further in the future, especially if this monetary policy variance story remains the same. But the pace is very fast and it looks a little hot, so if we see any counter headlines, we can. See some corrections,” he added. .

Yields on the 10-year treasury were 2.5567% last May, the highest since May 2019, and up 6.5 basis points as traders positioned themselves in the intense series of US Federal Reserve rate hikes.

The two-year yield was 2.412%, the highest since April 2019, when these higher rates are in favor of the dollar. The greenback against the basket of major competitors rose 0.38% to 99,194.

The euro was down 0.27% at $ 1.0950 and the sterling was down 0.36% at $ 1.3150.

“We expect the euro to be higher this week. The risk balance EUR / USD may test 1.0800 in the coming weeks,” CBA analysts said in a statement.

Inflation figures from key European economies and the eurozone will be available from Wednesday, which could also affect the direction of the euro.

The ability to drive the dollar this week is the most non-agricultural wage data in the US on Friday, and although the market has already stabilized at the aggressive pace of this year’s rate hikes, analysts say its impact could be muted.

The Aussie dollar rose to $ 0.7513 near last week’s four-month high, but was helped day by day by the long-term impact of Australian bond yields and higher commodity prices.

Aussie currency observers also anticipate Australia’s budget on Tuesday. The Australian treasurer said on Sunday that the budget would mark the most significant material improvement for the government’s grassroots.

The Kovit-19 situation in China is a possible intervention for the Aussies, following the announcement on Sunday that Shanghai would lock down the city to carry out the Kovit-19 test.

The dollar rose to a two-week high of 6.3986 against the dollar in early trade on Monday.

Bitcoin in cryptocurrency markets sat around $ 46,900 after rising to $ 47,766 in early trade, its highest level since early January.

Ether, the world’s second largest cryptocurrency, was $ 3,320.

Report by Alun John in Hong Kong and Kevin Buckland in Tokyo; Editing Sri Navaratnam

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