SINGAPORE (Reuters) – The Japanese yen traded around five-month lows against the dollar on Monday, helped by rising U.S. yields as tight year-end liquidity kept most currencies in a tight range.
The Yen traded hands at 157.82 with only the risk of Japanese intervention preventing another test of the 160 level last seen in July.
The measure compared to the main rivals was the same at 107.99.
The euro was at $1.0429, not far off recent lows and in a holding pattern during holiday trading. The currency is heading for a calendar year decline of approximately 5.5% against the dollar.
Rising US Treasury yields were a tailwind for the dollar, with the benchmark 10-year note last week hitting its highest level in more than seven months. On Monday, the yield moved close to that limit, at 4.625%.
“Despite paid forecasters almost universally calling for a weaker US dollar in 2024, the greenback looks set to end the year higher against all major currencies, with the greenback leading the way,” said Chris Weston, head of research at the Australian online broker. Pepperstone.
For the month, the dollar index is up 2.3%, bringing its year-to-date gain to 6.6%.
It has gained in each of the past three months, helped by expectations that President-elect Donald Trump’s policies of looser regulation, tax cuts, higher tariffs and stricter immigration will be both pro-growth and pro-inflation and will keep US yields high.
The dollar has gained 10 yen since Dec. 3, with much of the Japanese currency’s decline coming after the Federal Reserve’s Dec. 18 cautionary message about future interest rate cuts.
That view weighed heavily on the yen, which hit its lowest level since July 17 last week at 158.09 to the dollar and is down 10.6% so far this year.
It fell from those lows on Friday after a summary of views from the Bank of Japan’s December policy meeting showed some policymakers were gaining confidence in an imminent interest rate hike, while Japan’s central bank also cut its monthly bond purchases.
Still, Japanese yields remain extremely low, and recent comments have sown doubts about the BOJ’s commitment to raising rates. The BOJ kept interest rates steady at 0.25% at a meeting this month, and Governor Kazuo Ueda said the central bank was looking closely at more data on wages momentum for next year and the clarity of the new US administration’s economic policies.
A Reuters poll earlier this month suggested the BOJ could raise rates to 0.50% by the end of March, with interest rate markets seeing just a 42% chance of a rate hike in January.
Traders are watching for any possible intervention by Japanese officials to support the currency if it continues to weaken, as it has done several times this year.
Japanese Finance Minister Katsunobu Kato reiterated concerns about the yen’s decline on Friday, reiterating his warning to take action against excessive currency movements.
Pepperstone’s Weston said dollar buyers continued to dominate trading in the dollar-yen pair.
“It’s rarely a good buy in any market pushing new highs, but in my view, any break above 158.00 is good for chasing – although yen shorts carry increasing risk of a credible MOF and possible intervention,” he wrote is Weston in a note to clients.
With the exception of the yen, exchange rate movements in major markets were tepid last week. The yen fell 0.9%, the euro fell 0.2% and the pound gained 0.1%, while the dollar index rose 0.2%.
The next interest rate cut by the European Central Bank could be delayed after the recent rise in inflation, ECB Governing Council member Robert Holzmann said on Saturday.
Leading cryptocurrency bitcoin was also sluggish around $93,052, down about 4% on the previous month after retreating from a record high of $108,379.28 hit on December 17. So far this year, it has grown by around 115%.
