The Japanese yen was at its strongest versus the dollar in nine days after Japan’s government bond yields hit another cycle high.
The 10-year JGB yield was up 1.5 basis points early Wednesday, trading at 1.255% for the first time since April 2011, according to Reuters, after Bank of Japan governor Kazuo Ueda made comments that left open the possibility of an interest rate rise at the monetary policy meeting later this month.
In addition, finance minister Katsunobu Kato on Wednesday reiterated the government would take action against excessive moves on forex markets. “The government has been alarmed over foreign exchange moves, including those driven by speculators.” he said.
The yen, which last summer hit a multi-decade low around 162 per dollar, strengthened by 0.7% on Wednesday to 156.80.
The USD/JPY cross is hyper-sensitive to U.S./Japan interest rate differentials and so forex traders will be keenly watching the upcoming U.S. CPI report.
The USD/JPY has tracked the increase in U.S. Treasury yields over recent weeks very closely, so any sign that U.S. interest rates may retreat again, while the BOJ considers hiking, could catch out yen bears.
