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Yen Weakens Past 140 Per Dollar as Traders See Another Fed Hike
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2023-05-26 04:20
The yen weakened beyond 140 per dollar for the first time since November as traders moved to price

The yen weakened beyond 140 per dollar for the first time since November as traders moved to price in another Federal Reserve interest-rate increase, underscoring diverging expectations for monetary policy in Japan and the US.

Japan’s currency slid as much as 0.5% to 140.23 per dollar, touching the weakest since Nov. 23, as two-year Treasury yields surged Thursday.

Traders fully priced in another quarter-point rate increase by the Fed within the next two policy meetings and a more than one-in-two chance that hike could come as soon as next month. The move came on hints of optimism about a potential debt-ceiling deal and economic data suggesting resilience. US officials have failed to resolve their debt-cap impasse even after Fitch Ratings warned the nation’s AAA rating was under threat from the standoff.

“The move to 140 is really a dollar story, not a yen story,” said Bipan Rai, a currency strategist at Canadian Imperial Bank of Commerce.

The yield on the policy-sensitive two-year note rising nearly 16 basis points to 4.53%.

“When USD/JPY moves it always moves big so we’ll see, maybe we’ll be at 143 next week,” Brad Bechtel, a foreign-exchange strategist at Jefferies.

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