Yen Gains, UST Yields Drop on Tariff Risk-Off Mood
The Japaneses yen outperformed Group-of-10 peers as worsening risk sentiment ahead of US tariffs on Canada, Mexico and China prompted a drop in Treasury yields.
USD/JPY down 0.4% to 148.90; the pair dropped as much as 0.6% earlier.
US president Donald Trump said Japan and China are putting the US at an unfair disadvantage when they weaken their currencies; Japanese Finance minister Katsunobu Kato said the country has not adopted an FX policy to weaken the yen.
UST yields fell across the curve, with the 10-year down more than three basis points to 4.13%.
“The sharp fall in UST yields is likely the main trigger” of the yen gains today, said Christopher Wong, a strategist at Oversea-Chinese Banking Corp.
A risk-off mood owing to Trump’s tariffs on Canada, Mexico, China contributed the yen’s advance.
BOJ has room to further pursue policy normalization given wage growth prospects and broadening services inflation; growing Fed-BOJ policy divergence also drives USD/JPY to downside.
USD can go lower selectively, but the greenback may not go much lower against RMB, MZN, CAD and high-beta proxy FXs such as AUD, KRW.
Dollar-yen selling is being prompted mainly by the drop in US yields, as leveraged accounts position for a speech from BOJ Deputy Governor Shinichi Uchida on Wednesday, according to Asia-based FX traders.
AUD/USD dropped 0.4% to 0.6200, underperforming G-10 peers.
Australia’s dollar fell under leveraged selling as the nation’s sovereign bond yields resume declines against a backdrop of escalating tariff tensions, according to Asia-based FX traders.
USD/CAD gained 0.1% to 1.4493.
“Commodity-linked currencies like the AUD, NZD, and CAD to remain highly sensitive to risk appetite in global markets,” Philip Wee, senior FX strategist at DBS, wrote in a note.
EUR/USD traded flat at 1.0488.
Source : Bloomberg
