Dollar hits highest level against the yen in almost 3 years as markets hold Fed’s progressive bets By Reuters

By Ritvik Carvalho

LONDON (Reuters) – The dollar hit its highest level in nearly three years against the yen on Monday as investors remain confident the US Federal Reserve will announce a cut in its massive bond purchases next month despite massive numbers lower wages in the United States.

Jobs data released on Friday pushed U.S. bond yields higher, and so the yen, which is known to be particularly sensitive to yield spreads, slipped to 112.84 yen to the dollar at the start of the year. the London session on Monday – a level last seen in December. 2018.

The Japanese currency was also affected by a slight tilt towards riskier currencies, with the British Pound and Australian Dollar both rising slightly on the Greenback, leaving the Dollar Index slightly lower at 94.137, but close to d ‘a one-year high of 94.504 reached earlier this year. month.

The yen was also weighed down by the continuation of the rally, given Japan’s status as a net importer of oil, said Joel Kruger, currency strategist at LMAX, adding that the currency is also hampered by policy divergences. between the Bank of Japan and its peers, leading to a widening of the yield differential.

“The yen came under strong selling pressure for the third day in a row,” Kruger said. “This is due to a feedback loop with the Japanese stock rally, while the broader sentiment was lifted by Prime Minister Kishida’s comment on the capital gains tax.”

The 225 stock index rose for a third straight session on Monday, extending its rally after a six-week low last week, as a sharp drop in the yen boosted exporters as COVID-infections fell. 19 reinforced hopes for economic reopening.

Also backing the actions, Japanese Prime Minister Fumio Kishida said on Monday he would prioritize raising wages through tax incentives, rather than imposing higher levies on capital gains and dividends to close the income gap in Japan.

U.S. currency and fixed income markets are closed for a holiday on Monday, but the benchmark 10-year Treasury yield hit a four-month high of 1.617% on Friday, even after data showed that the US economy created the fewest jobs in nine months in September, significantly underperforming economists’ forecasts.

However, data for August was sharply revised upwards and the unemployment rate fell to its lowest level in 18 months, suggesting that fears of labor shortages remain justified, maintaining concerns about the inflation and giving the Federal Reserve a rationale for cutting back on its emergency stimulus measures that began last year.

“Although the payroll figure is low, when you look at the details the outlook remains strong and nothing would stop the Fed from declining next month,” said Shinichiro Kadota, senior currency strategist at Barclays (LON :).

The group has been little moved by the ongoing difficulties of Chinese developer China Evergrande Group, even as offshore bondholders brace for news of more than $ 148 million in bond coupon payments looming after the company missed two coupon maturities last month.

The latest was at 6.4370 to the dollar towards the upper end of its recent range, but still below its high of 6.422 reached in September.

The Australian dollar strengthened a bit, approaching its high for a month, helped by strong commodity prices and a partial reopening of Sydney, Australia’s largest city.

Concerns about inflation are not confined to the United States, with supply disruptions and rising commodity prices affecting many other countries.

The British pound held steady at $ 1.3634, prolonging its rally from a nine-month low set at the end of last month, given rising expectations that the Bank of England could raise rates. interest in curbing the surge in inflation.

The Canadian dollar changed hands at C $ 1.2450 to the US dollar, after hitting a two-month high of C $ 1.24465 on surprisingly strong Canadian wage data and high oil prices.

On the flip side, the euro was weak at $ 1.1575, hovering a little above Wednesday’s low of $ 1.1529, its lowest level since July of last year.

In cryptocurrencies, bitcoin gained 3.5% to a new five-month high of $ 57,092, extending gains made over the weekend, while ether also rose 5% to $ 3,620.