Yen development continues on low US dollar; markets on the outskirts of Pelosi

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In early trade on Tuesday, the benchmark 10-year Treasury yield decreased to 2.53 percent, its lowest level since April. Investors are starting to ready themselves expecting the U.S. Federal Reserve to change course and focus more on an economic downturn rather than aggressively raising interest rates to battle inflation. Wong said that somewhat lower energy prices were also aiding the yen since Japan was a net energy importer, stating that this repricing of expectations for Fed rate hikes was likely overdone. Due to concerns about Pelosi’s visit, the dollar was also gaining from some flows into safe haven assets.

This caused the dollar index, which compares the value of the dollar to six other currencies, to drop to 105.03 in early trading, a one-month low. The Australian dollar was staying steady slightly above $0.7 in other currency markets ahead of a central bank meeting where analysts anticipate a third straight half-point interest rate increase. The price of one bitcoin was $23,250.

Story Highlights

  • “Its the same old story with the yen being very sensitive to the gap between U.S. and Japanese government bond yields. Of course Japanese ones aren’t moving because of Japan’s yield curve control policy, but U.S. yields have dropped a lot,” said Redmond Wong, market strategist at Saxo Markets Hong Kong

  • On Tuesday, the offshore yuan of China fell to 6.7957 per dollar, the lowest level since mid-May. Wong ascribed this in part to the hostilities surrounding Pelosi’s visit as well as the unfavourable economic figures that came out of China over the weekend. The Taiwan currency dropped past 30 to the US dollar, reaching its lowest levels in more than two years. Sterling was at $1.2256, just below a five-week high reached overnight, and the euro was also on the rise at $1.0294, as the dollar was generally lower.