Rising U.S. yields push yen to lowest

On Tuesday, the Japanese yen remained at its worst levels against the U.S. dollar in over three years, as a continuous climb in Treasury yields widened the yield edge favouring the greenback.

The dollar traded at 113.19 yen before sliding to 113.50 in Asian trading, its lowest level since December 2018.

As global bond yields climb due to inflationary concerns, the yen is weakening by 4% in three weeks. For the first time since late May, ten-year U.S. Treasury yields have reached 1.60 per cent. The rise in market-based inflation forecasts and hawkish movements from central banks outside of Japan lead to sell-offs in global fixed asset markets and the yen. According to a monthly market mood poll conducted by Deutsche Bank in October, most respondents expect U.S. Treasury rates to rise from present levels.

The yen also remained at multi-month lows

The yen also remained at multi-month lows versus other major currencies, with sterling, the euro, and the Australian dollar trading just off three-month highs against the Japanese currency the previous day. The dollar index, which measures the greenback against a basket of other major currencies, was trading at 94.30, not far from a one-year high of 94.504 reached at the end of September. Traders braced for the United States Federal Reserve to announce a tapering of its massive bond-buying program in November.

The fundamental driver of the increase is the further rise in U.S. Treasury yields. So it’s a relatively basic narrative of a widening rates differential, said Ray Attrill, head of foreign exchange strategy at National Australia Bank.

Bitcoin fell 1.3 per cent in Asian trading to $56,700, edging away from a five-month high. Ether, the world’s second most valuable cryptocurrency, fell 1.54 per cent to $3,489.