Dollar hits five-year high on yen as Fed rate hikes boost US yields Reuters

By Kevin Buckland

TOKYO (Reuters) – The U.S. dollar hit a five-year high against the Japanese yen on Wednesday, amid a jump in Treasury yields as traders backed the Federal Reserve’s early interest rate hike despite rising COVID-19 cases.

The greenback rose to 115,815 yen for the first time since Jan. 11, 2017, as long-term Treasury yields jumped 12.5 basis points overnight, touching 1.6420% for the first time since Nov. 24.

Money markets are fully priced at the first rate hike in the U.S. in May, and another two by the end of 2022.

The currency, which measures against the yen and five other major counterparts, remained close to a week high of 96,328 on Monday.

“The market is putting the price in a more aggressive scenario of a rate hike in the US in 2022 – or at least the risk of it – and this is certainly the mainstay of the dollar,” said Shinichiro Kadota, FX chief strategist. Barclays (LON 🙂 Tokyo.

“The key question this year is where is inflation going, where is the peak going?”

The euro traded at $ 1.1302, removing a one-week low of $ 1.12795 from the night.

The pound fell to $ 1.34685 and fell to a night-time low of $ 1.3431 from an unseen level since Nov. 29.

The Australian dollar was close to a two-week low of $ 0.7184 in the previous session.

The rise in coronary artery disease cases caused by the Omicron variant continued to affect global travel and public services, and despite the delay in reopening some U.S. schools after the holidays, investors continued to hope that blockades would be avoided.

On Monday, the U.S. Food and Drug Administration authorized the use of a third dose Pfizer (NYSE 🙂 and BioNTech COVID-19 vaccine for children ages 12 to 15, and reduced the time of all booster shots to five months from the first dose to six months.

Signs that Omicron is highly contagious but carries a more serious disease than variants like Delta have boosted the “Omicron Relief Trading” yields on shares and bonds that could dominate market sentiment in January, OANDA analyst Jeffrey Halley wrote in a statement.

In the case of the dollar-yen, “assuming that U.S. yields continue to rise, there is nothing on the charts to stop the rise to 118.00 in the coming weeks,” he said.

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Currency supply prices at 0552 GMT

Description RIC Latest US Close Pct Switch YTD Pct High Bid Low Bid

Previous Change

Session

Euro dollar

$ 1,1302 $ 1,1299 +% 0.04 -% -0.58 +1,1309 +1,1293

Dollar / Yen

115.7800 115.2600 + 0.46% + 0.67% +115.8100 +115.3400

Euro / Yen

130.85 130.27 + 0.45% + 0.41% +130.8900 +130.2500

Dollar / Switzerland

0.9183 0.9186 – 0.05% + 0.66% +0.9190 +0.9175

Pound sterling / dollar

1.3468 1.3481 – 0.08% – 0.40% +1.3485 + 1.3464

Dollar / Canadian

1.2728 1.2746 – 0.14% + 0.67% + 1.2755 + 1.2725

Aussie / Dollar

0.7212 0.7191 + 0.30% – 0.78% + 0.7216 + 0.7185

NZ

Dollar / Dollar 0.6795 0.6788 + 0.14% -0.69% +0.6803 +0.6785

All places

Places in Tokyo

European spots

Volatility

Information on the Tokyo Forex Market from BOJ