Yen Hits 14-Month High on Narrower Rate Gap Bets
The yen extended its dramatic advance by surging to its highest since July 2023 as traders bet that a large Federal Reserve rate cut this week would shrink the US-Japan yield gap.
USD/JPY fell as much as 0.6% to 139.96 amid thin trading due to a holiday in Japan. The Bloomberg Dollar Spot Index fell 0.2% as traders increasingly priced the possibility of a 50 basis points Fed rate cut this week.
USD/JPY's implied volatility rose across contract lengths as traders positioned for Fed and Bank of Japan policy decisions this week. Broad-based dollar sales contributed to the yen's advance on Monday
"The real driver here is the changing expectations on the Fed," Eugenia Victorino, SEB's Asia strategy head told Bloomberg TV. "Rate differentials at the end of the day are really in favor of a lower dollar/yen".
EUR/USD climbed 0.2% to 1.1098.
There was no trading of cash treasuries in Asia due to a holiday in Japan.
Source: Bloomberg