But
the Japanese unit bounced in London trading as increased
nervousness around verbal intervention and growing speculation
around an impending bilateral meeting between U.S. Treasury
Secretary Yellen and her Japanese counterpart prompted traders
to trim some short bets.
Still, positioning in the derivatives and currency futures
suggest the yen weakness has more room to run.
The BOJ again offered to buy unlimited amounts of Japanese
government bonds to check the rise in Japanese 10-year yields,
which were butting against its 0.25% tolerance ceiling.
In contrast, Treasury yields marched to three-year highs while
inflation-adjusted bond yields hit positive territory for the
first time since March 2020 as hawkish comments by policymakers
reinforced expectations of aggressive U.S. interest rate hikes.
The U.S. dollar reached 129.43 yen for the first time since
April 2002 in Asian trading before easing to last trade 0.9%
lower at 127.82.
"The 130 is a psychological level; if we break it (likely) then
momentum will likely drive USDJPY even higher," said Vasileios
Gkionakis, EMEA head of FX G10 Strategy at Citibank.
"This is a play on monetary policy divergence with the Fed in
tightening mode and the BoJ still easing."
The dollar's rally against the yen has come as U.S. Treasury
yields pushed higher, with 10-year yields touching 2.981% for
the first time since December 2018 in Tokyo trading.
Inflation-adjusted U.S. 10-year yields hit 0% overnight.
"The yen remains the loser of the monetary policy normalisation,"
Commerzbank strategists said.
Elsewhere, the euro was the other big gainer in London after
media reports that some ECB policymakers were forecasting a
first rate hike as early as July. The single currency was up as
much as 0.6% at $1.0853.
The dollar index, which measures the currency against six major
peers including the yen, early in the day matched Tuesday's high
at 101.03 - a level not seen since March 2020 - before easing to
100.38, down 0.6% in the day.
An index of currency market volatility firmed above 8% but still
well below 2022 highs of 10% hit in March.
The offshore Chinese currency was the other big loser with the
unit declining 0.4% to 6.44 yuan per dollar.
(Reporting by Saikat Chatterjee; Editing by William Maclean and
Chizu Nomiyama)
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