On Friday, the yield on the 10-year U.S. Treasury bond soared again, rising by nearly 6 basis points during the day, reaching 4.282%, pushing the U.S. dollar index above 113.5.
The yield on Japan’s 10-year government bond continued to fall slightly, hovering below the upper limit of the policy target of 0.25%. According to reports, the Bank of Japan spent 100 billion yen for two consecutive days to purchase 10- to 25-year Japanese government bonds.
The Japanese government is still conducting “verbal intervention”, with Japanese Finance Minister Shun Suzuki saying on Friday that the authorities are “strictly” dealing with foreign exchange speculators.
When asked at a regular news conference whether the yen was under attack from speculators, Suzuki said:
“We are strictly cracking down on speculators. We will not tolerate excessive behavior by speculators. We will respond appropriately while observing foreign exchange market movements with a high sense of urgency.”
The continued sell-off of the yen has made the market highly vigilant that the Japanese government may enter the market to intervene in foreign exchange again, and investors are looking for all clues that the Bank of Japan may secretly intervene.
They argue, however, that the impact of any such action will be limited.
Masafumi Yamamoto, chief foreign exchange strategist at Mizuho Securities, said:
“I don’t rule out further intervention. If they intervene, they may do something bigger. But that won’t work because it goes against the tide of a strong dollar.”
Japanese government officials have repeatedly reiterated their concerns about the yen’s rapid decline in recent days, but Bank of Japan Governor Haruhiko Kuroda reiterated in a speech in Tokyo on Friday that he will continue to implement loose monetary policy to support the economy and drive wage growth.
As the yen continues to weaken, Japan’s overall consumer price index (CPI) increased by 3% year-on-year in September. If the impact of the increase in consumption tax is deducted, the inflation rate is the highest since August 1991.
Kuroda Haruhiko said that he will pay attention to the impact of foreign exchange on the economy and prices, but expects the CPI to slow down after peaking at the end of the year.
While the world has aggressively raised interest rates to quell rising prices, Japan still adheres to its loose monetary policy, causing the yen to fall against all major currencies during the year.The Bank of Japan is expected to maintain its existing monetary policy after its two-day meeting on Friday.
U.S. dollar index rises as other currencies fall
Not only the Japanese yen, but other non-U.S. currencies also fell under pressure as the U.S. dollar index continued to soar.
GBP/USD falls to 1%, now at 1.1125, the currency’s gains yesterday have been completely reversed, and investors believe that Truss’ resignation as prime minister does not necessarily mean that political uncertainty in the UK will be eliminated.
According to economists at MUFG, GBP/USD could return to levels below 1.10. Sterling may also underperform against the euro, currently down 0.63%.
The euro was down 0.39% against the dollar and is now at 0.9745.
