As investors continued confidence, the U.S. Federal Reserve will publish a tapering of its extensive bond-buying next month, notwithstanding softer U.S. payrolls figures.
The jobs data published on Friday launched U.S. bond yields higher. The yen is for being especially sensitive to yield differentials. It slid to as low as 112.84 yen per dollar in early London trading on Monday. This level was last in December 2018.
The Japanese currency also took a hit from a slight tilt towards riskier currencies such as sterling and the Australian dollar. Both increased slightly on the dollar. It left the dollar’s index a touch weak at 94.137. However, it is not far from a one-year high of 94.504 from earlier this month.
According to Joel Kruger, currency strategist at LMAX, an extended crude oil rally also pulled down the yen, given Japan’s standing as a net oil importer. He added that the monetary policy divergence within the Bank of Japan and its rivals also hinders the currency. It is driving a widening yield differential.
Other Currencies and Stocks
Japan’s Nikkei 225 stock market index climbed for a third continuous session on Monday. It continued its recovery from a six-week low recorded last week, as a sharp drop in the yen supported exporters. In opposition, a decline in coronavirus infections continued to economic reopening hopes.
Also underpinning stocks, Japanese Prime Minister Fumio Kishida stated on Monday he would prioritize increasing wages through tax incentives rather than requiring higher levies on capital gains and dividends to address Japan’s income gap.
U.S. currency and fixed income markets are shut on Monday for a holiday. However, benchmark 10-year Treasuries yield caught a four-month high of 1.617% on Friday. Although data revealed the U.S. economy performed the fewest jobs in nine months in September, significantly underperforming economists’ estimates.
The Chinese yuan was little moved by the continuing travails of Chinese developer China Evergrande Group. Offshore bondholders strengthen for news on more than $148 million in emerging bond coupon payments after the company dropped two coupon deadlines last month.
The offshore yuan was last at 6.4370 by dollar towards the top end of its current range but still short of its high of 6.422 scores in September.
The Australian dollar firmed a little, trimming adjacent to its highest in a month, supported by high commodities prices and a partial reopening of Sydney, Australia’s most populous city.
Inflation worries are not restricted to the United States, with supply interruptions and soaring commodity prices concerning many countries.