The Dollar climbs toward 159.00 Yen as US 10-year yields hit 5% and the interest-rate gap between the Fed and the BoJ remains wide, limiting the Yen's recovery potential despite expectations of a December rate hike.
New US 10-year notes sold on Tuesday pay 5% a year, the most since 2006, marking a clear rise in the benchmark yield. Bowman's comments that October CPI suggests inflation pressures may persist support the view that US rates stay higher for longer. Friday's PPI, forecast at 6.6% annually after 6.3%, could push yields further.
The Dollar has surged to just under 159.00 Yen, more than reversing Monday's drop, as new 10-year Treasuries yield 5%, the most since 2006. With the Fed at 3.75%-4.00% versus the BoJ at 1.25%, and a December 18 BoJ hike to 1.50% only matching a Fed move to 4.00%-4.25%, the rate gap stays wide, favoring a higher pair. The pair sits at the top of its range since September 24, which argues for some resistance.
The Yen has fallen to its weakest against the Dollar since mid-October as US 10-year yields hit 5%, the most since 2006, widening the yield advantage of Dollar deposits to roughly 2.50-2.75 points. Even the BoJ summary showing members agreed rates should keep rising failed to lift the Yen. The expected December 18 hike to 1.50% would leave the gap with the Fed unchanged.
The Dollar rose to just under 159.00 Yen, more than reversing Monday's drop, supported by new 10-year Treasuries paying 5%, the most since 2006. Fed Vice Chair Bowman's view that inflation isn't on a downward trend argues against near-term rate cuts, keeping Dollar yields attractive. Thursday's jobless claims and Friday's PPI could shift the outlook.
The US Dollar has surged to just under 159.00 Yen, reversing recent losses as US 10-year Treasury yields reached 5%, the highest level since 2006. Fed Vice Chair Bowman signaled that persistent inflation pressures may keep US rates elevated, maintaining a significant 2.50-2.75 percentage point yield advantage over the Bank of Japan's 1.25% rate.
New 10-year notes sold on Tuesday pay 5% a year, the most since 2006.
October producer prices are due Friday at 13:30 GMT with a 6.6% annual rise forecast after 6.3%, and both PPI and Thursday's jobless claims bear on how far US rates go above Japan's.
New 10-year US notes pay 5% a year, the most since 2006, and a Dollar deposit pays roughly 2.50-2.75 percentage points more than a Yen one, so investors favor the Dollar and the pair has risen to just under 159.00.
Most economists expect the BoJ to hike to 1.50% on December 18, but that comes nine days after an expected Fed move to 4.00%-4.25%, leaving the interest-rate gap exactly where it is, which limits the support for the Yen.
The BoJ's October meeting summary showed members agreed rates should keep rising, but the Yen still fell because the US rate advantage stayed intact, with the Fed at 3.75%-4.00% against the BoJ's 1.25%.
Japan's October producer prices, due at 23:50 GMT on Wednesday and forecast up 6.5%, are among the last price figures before the BoJ's December 17-18 meeting, where most economists expect a hike to 1.50%.
US 10-year notes sold Tuesday pay 5% a year, the most since 2006, and Fed's Bowman said inflation isn't on a downward trend, keeping US rates high relative to Japan's 1.25%.