HONG KONG: The yen held onto most of its overnight gains on Friday as falling US interest rates and market jitters propelled the Japanese currency, while another sell-off on Wall Street propelled the flight-so-security bid to the dollar, which is nearing 20-year highs continues.
The yen stood at $129.14 per dollar on Friday morning and softened the day after hitting a two-week high of 127.5 overnight.
The 1.2 percent drop for dollar/yen on Thursday was the largest daily percentage drop this year. The euro/yen cross fell 2.5 percent, the biggest daily percentage drop since 2016, as the common currency fell victim to the “risk off” vote.
“The yen is perhaps the most obvious signal of a shift from a world where returns have been dominant and risk has been resilient (negative yen), to a world this week where the predominant force is sour risk appetite that drives returns. decreases (yen positive).” Alan Ruskin, a macro strategist at Deutsche Bank, said in a note.
The 10-year benchmark return in the US was 2.8822 percent, falling each session this week from Monday’s high of 3.203 percent.
Rising US interest rates at a time when the Bank of Japan stepped in to keep Japanese benchmark yields low caused the yen to weaken this year.
Investors continue to move towards safe-haven assets, fearing that central bank rate hikes to curb inflation could hit global economic growth, while the MSCI index of stocks around the world fell overnight to its lowest level since November 2020.
After the Fed hiked its benchmark overnight rate by 50 basis points last week, its biggest rise in 22 years, investors are assessing how aggressive the central bank’s policy path will be.
According to CME’s FedWatch Tool, expectations have been fully priced in for another hike of at least 50 basis points at the central bank’s June meeting.
The euro stood at $1,038 and approached the 2017 low of $1,034. A breakthrough that would be the lowest in nearly 20 years.
The weak euro kept the dollar index at 104.75, just short of its overnight 20-year high of 104.92.
Sterling fell to $1,2206, and the Aussie dollar was also bruised at $0.6887.
Crypto markets were more stable on Friday after a week of turmoil as the risky mood coupled with the spectacular collapse of the TerraUSD stable coin.
The sell-off has brought the combined market value of all cryptocurrencies to $1.2 trillion, less than half of where it was last November, according to data from CoinMarketCap, sending bitcoin to a low of $25,401.05 on Thursday. the lowest level since December. 28, 2020.
But things were calmer in early trading on Friday, with bitcoin up 1.73 percent at around $29,400.