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Yen Under Pressure as US Treasury Yields Rise

On Tuesday, the dollar exhibited tentative movements, failing to gain significant momentum from an increase in U.S. Treasury yields. However, this upward pressure on yields continued to weigh on the Japanese yen, which remained near multi-decade lows, prompting traders to monitor closely for any potential intervention signals.


Against the yen, the greenback edged up by 0.03% to reach 151.87 yen, remaining in proximity to the 34-year high of 151.975 yen recorded last month. Japanese officials continued to intensify their verbal interventions in attempts to support the currency.


Finance Minister Shunichi Suzuki reiterated on Tuesday that authorities are prepared to consider all options to address excessive movements in the yen, emphasizing Tokyo’s readiness to act against the recent sharp depreciations.


Despite the surge in U.S. Treasury yields, which typically correlates closely with movements in the dollar/yen pair, the threat of intervention from Tokyo has prevented the dollar from breaching the key 152 yen threshold.

Ryota Abe, an economist at SMBC, anticipates that the USD/JPY pair will persist within a narrow range of 151.0-152.5, suggesting potential Japanese intervention in the currency market to mitigate volatility if the dollar/yen pair experiences a rapid surge.

In broader market movements, the New Zealand dollar rose by 0.15% to $0.6041, shrugging off concerns highlighted by a private think tank survey indicating a weakening of business confidence in the country during the first quarter.

Sterling posted a modest gain of 0.04% to $1.2658, while the euro stabilized around $1.0860, near a two-week high.

Despite the upward trajectory of U.S. Treasury yields, the dollar struggled to gain substantial support as traders recalibrated their expectations regarding the timing and extent of potential Federal Reserve rate cuts later in the year.

The dollar index, measuring the currency against a basket of peers, lingered near a two-week low at 104.13.

Although the two-year Treasury yield reached a more than four-month high on Tuesday, and the benchmark 10-year yield remained near a similar peak, futures contracts suggested approximately 60 basis points of easing priced in for the Fed this year. Market sentiment increasingly doubted the initiation of an easing cycle in June.

Ray Attrill, head of FX strategy at National Australia Bank (NAB), remarked on the ongoing discrepancy between rising U.S. Treasury yields and the dollar’s subdued response. He attributed this phenomenon to signs of improvement in global economic conditions outside the United States and a broader trend of commodity price strength, suggestive of a global reflation trade.

In other currency movements, the Australian dollar dipped marginally by 0.01% to $0.6604, while the offshore Chinese yuan stood at 7.2437 per dollar.

Although recent upbeat Chinese economic data provided some support to the yuan, the currency remained near a 4-1/2 month low reached on April 3, down 1.8% year-to-date, despite firmer daily benchmark settings by the central bank.