Yen Falls as Interest Rate Forecasts Vary; NZ Dollar Falls
The yen fell against key rivals on Monday after data from the United States supported the argument for additional Federal Reserve rate hikes, underlining a widening gap with Japan, where the central bank continues to keep the benchmark yield around zero. Likewise, the risk-sensitive New Zealand and Australian currencies fell as US-China tensions over Taiwan escalated, with Beijing serving as a crucial trading partner for the Antipodean states.
The yen fell against key rivals on Monday after data from the United States supported the argument for additional Federal Reserve rate hikes, underlining a widening gap with Japan, where the central bank continues to keep the benchmark yield around zero.
Likewise, the risk-sensitive New Zealand and Australian currencies fell as US-China tensions over Taiwan escalated, with Beijing serving as a crucial trading partner for the Antipodean states. The yen fell 0.3% versus the US dollar to 132.47, continuing a similar-sized drop from Friday when statistics indicated that the US economy added jobs at a rapid rate in March.
In truncated trading on Friday for the Easter break, ten-year Treasury rates touched 3.413%. The yield stayed high at 3.3776% in Tokyo on Monday when many Asian and European markets would be closed. The yen fell 0.5% against the euro to 144.49. It decreased by 0.3% vs sterling to 164.54.
According to Mizuho analysts Masafumi Yamamoto and Masayoshi Mihara in a client letter, the dollar rose against the yen due to the ongoing solid development in the US labor market despite inflation and fast interest rate hikes. "Yields in areas like the eurozone, the United Kingdom, and Australia will follow U.S. rates upward, so the yield difference will not grow much," they said.
Nevertheless, the employment growth was lower than the previous month, and the increase in average hourly pay was lower than experts predicted, which Mizuho analysts said was inconsistent with a prolonged rise in US rates. They said that barring an upward surprise in US consumer pricing data on Wednesday, the dollar has limited potential to increase versus the yen from present levels.
Kazuo Ueda, the next Governor of the Bank of Japan, takes over from Haruhiko Kuroda on Monday and is largely anticipated to maintain significant stimulus for the time being. He will deliver his inaugural address at 7:30 p.m. JST (1030 GMT).
Likewise, the New Zealand dollar fell 0.6% to $0.6238, while the Australian dollar fell 0.21% to $0.6660. Both nations' stock and bond markets are closed for the Easter Monday holiday.
In offshore trade, the dollar rose 0.12% to 6.8830 yuan. On the day Taiwan President Tsai Ing-wen returned from a brief visit to the United States, China launched three days of military maneuvers simulating precise attacks against Taiwan.