homemarket Newscurrency NewsYen slides past 150 per dollar as yield gap with US remains wide

Yen slides past 150 per dollar as yield gap with US remains wide

The Japanese currency slid as much as 0.8% to 150.38 per dollar, the weakest in two weeks, as of 2:20 p.m. in Tokyo. Government bonds advanced on the BOJ’s slightly dovish tone, sending the 10-year yield down 2 basis points to 0.735%. The benchmark Topix equity gauge climbed 0.8% while the Nikkei 225 Stock Average rose 0.4%.

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By Bloomberg  Mar 19, 2024 12:26:22 PM IST (Published)

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Yen slides past 150 per dollar as yield gap with US remains wide
The yen weakened past 150 per dollar after the Bank of Japan ended the world’s last negative policy rate while keeping financial conditions easy for now. Bonds and shares both gained.

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The Japanese currency slid as much as 0.8% to 150.38 per dollar, the weakest in two weeks, as of 2:20 p.m. in Tokyo. Government bonds advanced on the BOJ’s slightly dovish tone, sending the 10-year yield down 2 basis points to 0.735%. The benchmark Topix equity gauge climbed 0.8% while the Nikkei 225 Stock Average rose 0.4%.
Ahead of the decision some 90% of central bank watchers had seen the risk of authorities ending their negative rate settings at the meeting. The likelihood had been bolstered after the largest union group announced first-round results to annual wage negotiations that exceeded expectations.
“The decision today itself may be considered quite dovish, dragging the yen lower,” said Koji Fukaya, a fellow at Market Risk Advisory Co. in Tokyo, who said the ending of negative rates and yield-curve control was already priced in. “Keeping an accommodative stance does not mean they will not raise rates from here and therefore, investors would need time to assess the policy outlook.”
The yen had weakened slightly over the course of the week leading up to the BOJ decision as the dollar appreciated on the outlook for slowing rate cuts from the Federal Reserve.
Expectations for the yen to outperform its peers this year had all but evaporated recently, with strategists earlier this month forecasting the currency to end 2024 within a few percent of where it started.
Meanwhile, benchmark 10-year Japanese government bond yields had been edging higher while the nation’s stocks have rallied this year, with the Nikkei 225 reclaiming the high it set back in 1989.
High rates and a strong currency in the US have kept Japan’s 10-year yields and the yen under pressure — the 10-year US Treasury yield is around 4.3%.
The dynamic looks set to continue despite the BOJ’s hike given ongoing strength in the US economy and resilient consumer spending there. In addition, Japan’s central bank will continue to buy bonds and pledges to respond to any rapid rise in yields.
The “new era” of positive interest rates is “a confirmation of the recovery in Japanese economy,” said Charu Chanana, market strategist for Saxo Capital Markets Pte. “Higher returns on savings and investments in Japan can fuel spending power for consumers, and builds a case for Japanese equities to extend their momentum.”

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