Yen nears 159.00 with Treasuries back above 5%
- USD/JPY rises to its highest since mid-October, just short of 159.00.
- A BoJ summary shows members agree rates should keep rising, and the Yen falls.
- US producer prices for October land Friday, after a 1.3% September jump.
New US 10-year notes sold on Tuesday pay 5% a year, the most since 2006, and the Yen has dropped to its weakest against the Dollar since mid-October. The Dollar rose to just under 159.00 Yen, more than reversing Monday's drop and moving back above Friday's close.
Fed Vice Chair for Supervision Bowman said the October consumer price figures suggest inflation pressures may persist, and that inflation isn't on a downward trend. The Fed's 3.75%-4.00% range is 2.50-2.75 percentage points above the Bank of Japan (BoJ) rate of 1.25%, so a Dollar deposit pays roughly that much more than a Yen one.
A summary of the BoJ's October meeting, released on Tuesday, shows members generally agreed rates should keep rising, and the Yen still fell. The BoJ's expected December 18 hike to 1.50% would come nine days after a Fed move to 4.00%-4.25%, leaving the gap exactly where it is.
On the calendar
US weekly jobless claims are expected at 195K, against 189K, at 13:30 GMT on Thursday. Friday at 13:30 GMT brings October producer prices, with a 6.6% annual rise forecast after 6.3%, and both bear on how far US rates go above Japan's.
Japan's October producer prices are due at 23:50 GMT on Wednesday, forecast up 6.5% from a year earlier after 6.8%. They're among the last Japanese price figures before the BoJ's December 17-18 meeting, where most economists expect a hike to 1.50%.
On the charts
The Dollar is at the top of the range it has held against the Yen since September 24, which runs down to a low near 156.00 on October 23. That range is still well below the late-July peak near 164.00 and the September 2 high near 160.50.
USD/JPY daily chart
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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