USD/JPY Climbs on Rising US Yields and BoJ’s Dovish Policy

The yen falls amid rising US Treasury yields and dovish remarks from the BoJ – Photo: Getty Images

After a month of gains, the Japanese yen started June under pressure, with USD/JPY surging to 129.4, up 0.5% at the time of writing, after Treasury yields rose further. US and a dovish remark from the Bank of Japan (BoJ).

BoJ Deputy Governor Masazumi Wakatabe said the BoJ should maintain an easing bias to tackle low inflation and take more unambiguous action if economic concerns materialize.

Jerome Powell and Joe Biden had a rare meeting yesterday where they agreed that fixing inflation is the most crucial issue for the economy, even if it means the labor market will slow in the coming months. US Secretary Janet Yellen said she had misjudged the path of inflation in recent years.

Treasury yields are on fire again, with the 10-year note returning to the 2.9% mark.

The US Dollar Index (DXY) is up for the second consecutive session and is trading at 101.8 at the time of writing.

Chart of the day: USD/JPY is mainly driven by long-term US yields

a chart showing the relationship between USD/JPY and US Treasury yieldsJapanese Yen Suffers as US Treasury Yields Rise – Photo: Capital.com / Source: Tradingview

The Forex Market Today – June 1, 2022

The euro (EUR/USD) was little changed at 1.072 (-0.1% on the day). On the data front, Germany’s April retail sales disappointed the market, down 0.4% year-on-year against a +4% expectation, while the Eurozone unemployment rate held steady. at a historically low level of 6.8%, in line with projections.

The British pound (GBP/USD) slipped below $1.26, with price momentum – as gauged by the 14-day Relative Strength Index – showing signs of easing after crossing just below from the 50 mark.

The Swiss Franc (USD/CHF) fell further on higher US Treasury yields, mirroring yesterday’s daily performance (-0.2%).

The Canadian dollar (USD/CAD) is in the spotlight today as traders await the Bank of Canada’s interest rate decision. The market is expecting a 50 basis point rise to 1%, but hawkish comments could provide further support for the loonie.

The Australian Dollar (AUD/USD) is the only major currency showing gains against the US Dollar today. Better than expected first quarter Australian GDP data (+3.3% annualized vs. 2.9% expected) and the rise in the Chinese manufacturing PMI (48.1 in May, vs. 46 in April) supported the ‘ausian.

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The New Zealand dollar (NZD/USD) and the Norwegian krone (USD/NOK) were little changed.

Top Torques: Best Risers and Lowers Today – June 1, 2022

A forex chart that compares nine major currencies with each other, including USD, EUR, GBY, JPY, CHF, AUD, NZD, CAD and NOKMajor Currencies: Today’s Rises and Falls, June 1, 2022, 11:00 UTC – Photo: Capital.com

Forex markets: things to watch today

The Bank of Canada is expected to raise interest rates for the third consecutive time, with market prices rising 50 basis points to 1%, after inflation in Canada hit 6.8% in April 2022, the level the highest since January 1991.

The ISM manufacturing PMI for the United States is expected to remain in the expansion zone in May, at 55.4, unchanged from April. The focus will be on new orders and price changes to see if supply chain issues continue to hurt the manufacturing sector.

Christine Lagarde, President of the European Central Bank, will participate in a high-level panel at the Bank for International Settlements’ Green Swan 2022 virtual conference “Finance for the Transition, a Transition for Finance”.

Forex Market Heatmap – June 1, 2022

A forex chart showing the performance of the US dollar and euro against other currenciesForex market heat map June 1, 2022, 11:00 UTC – Photo: Capital.com

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