SINGAPORE/LONDON — The rate-sensitive Japanese yen continued tumbling on Thursday, falling past 142 per dollar, while sterling and the euro tried, and in the euro’s case failed, to recover from multi-year lows against the dollar hit the day before.
The dollar climbed 1.07% on the yen to 142.1, a fresh 24-year high. The dollar is up 23% against the Japanese currency so far this year.
“The FX market is re-focusing on rate hikes by major central banks and the Bank of Japan (BOJ) stood out at the Jackson Hole symposium as the only one that remained resolute about keeping monetary policy accommodative,” said HSBC analysts in a note.
“USD-JPY’s correlation with US yields has thus rebounded to near their strongest year-to-date level,” they wrote in the note, titled, “JPY: staring into the abyss.” The bank changed its forecast for the pair to 144 at the end of the third quarter up from 140 previously.
The U.S. benchmark 10-year yield was last at 3.2557%, up from Friday’s close of 3.191%. U.S. markets were closed on Monday for a holiday.
In contrast, the yield on 10-year Japanese government bonds was 0.24%, due to the BOJ’s yield curve control policy.
Elsewhere, the pound and the euro both gained over 0.6% against the dollar in morning trading in Europe, though while sterling managed to cling onto some of this, up 0.35% at $1.1564, the euro retreated to trade flat on the day at $0.99205, only just above its 20-year intraday low hit the day before.
“That governments are working on price caps, support for the consumer, and really trying to get a grip on the energy crisis helps set a floor under those two pairs,” said Samy Chaar, chief economist Lombard Odier.
The pound was also performing well on the crosses, gaining 1.44% against the yen.
Britain’s incoming Prime Minister Liz Truss is considering a freeze on household energy bills to try to avert a winter cost-of-living crisis for millions of households, Reuters reported on Monday.
European Union ministers will meet on Sept. 9 to discuss urgent bloc-wide measures to respond to a surge in gas and power prices that is hammering Europe’s industry and hiking household bills, after Russia curbed gas deliveries to the bloc.
The Australian dollar slid to a seven-week low after the Reserve Bank of Australia raised its cash rate by 50 basis points, but signaled it was not on a preset path for future rate hikes.
The Aussie was last 0.43% lower at $0.6768.
In China, the authorities’ efforts to slow the yuan’s recent depreciation were proving unsuccessful, with the yuan slipping to a fresh two-year low of 6.9784 in offshore trade.
China’s central bank late on Monday cut the foreign exchange reserve requirement ratio (RRR), freeing up dollars for banks to sell.
Two dealers also told Reuters South Korean authorities were suspected of selling dollars near the end of the onshore trading session on Tuesday in an apparent intervention to curb the won’s weakness.
(Reporting by Rae Wee, Editing by Shri Navaratnam, Sam Holmes, Ed Osmond and Tomasz Janowski)