Yen Falls to 158.4 as US Yields Spike to 19-Year High
The BOJ rate hike failed to boost the yen, which weakened to 158.4 per dollar as US Treasury yields hit 5.13%.
Key points
- The yen fell to 158.4 per dollar on Sept. 23, erasing gains from the BOJ's rate hike.
- US 10-year Treasury yields hit 5.13%, the highest level in 19 years and two months.
- Markets now see US interest rates and dollar strength as the primary drivers of yen value.
The yen weakened to 158.4 per dollar on Sept. 23. This happened just days after the Bank of Japan raised rates. The currency lost value despite the recent policy change.
Strong US economic data drove higher yields. The gap between US and Japanese rates widened. This pressure overwhelmed the effect of the BOJ's rate hike.
US Data Reverses Yen Gains
The BOJ lifted its policy rate to 1.25% on Sept. 18. Officials also checked exchange rates in the market. The yen initially strengthened but quickly reversed course.
New US purchasing managers index data beat expectations. Input costs rose to a three-year high. This fueled fears of renewed inflation in the US.
Treasury Yields Hit 19-Year High
The 10-year US Treasury yield rose to 5.13%. This is the highest level in 19 years. The five-year yield also moved above 5%.
Weak demand for five-year notes added to pressure. The auction yield reached 5.03%. Investors saw this as a sign of soft demand for debt.
Rate Gap Drives Currency Weakness
Markets now price a 70% chance of a Fed hike. This is up from 55% the day before. The US-Japan rate gap remains very wide.
Analysts view US rates as the main driver for the yen. Japanese policy is seen as less impactful. The dollar remains strong against other major currencies.
