Market Overview: Yen at 6-year low as Bank of Japan moves to contain bond yield surge

The Japanese yen fell on Monday to its lowest level in six years against the dollar and is on track to record its largest daily loss since March 2020, after the Bank of Japan moved to contain rising bond yields even as US Treasury yields rose to new highs not seen in years. several years.

The position of the Bank of Japan contrasts with that of most other central banks, especially the Federal Reserve (the US central bank), which is expected to raise interest rates by half a point in May after it began a wave of tightening of its measures this month.

Ten-year Treasury yields rose more than 2.5 percent to a three-year high, pushing the dollar to a two-week high.

In order not to extend this yield increase to the Japanese bond markets, the Bank of Japan offered to buy an unlimited amount of bonds with maturities of more than five years and up to ten years.

While that did not prevent the 10-year bond yields from reaching the upper end of the BoJ’s policy range, it did push the yen lower.

The dollar rose 2 percent against the yen on the day, hitting 124.65 yen, its highest level since August 2015 and the biggest one-day rise since March 2020.

The yen’s losses exceeded 7 percent in March, and it is expected to witness the largest monthly and quarterly declines since 2016.

The Australian dollar rose to $0.7527, holding near four-month highs, further supported by short-term bond yields, which reached their highest levels since 2014.

Against the Chinese yuan, the dollar touched a two-week high of 6.3983 before paring its gains.

In the case of cryptocurrencies, bitcoin gained 0.6 percent to approach its high in early January at $47,766.

European Union Economic Commissioner Paolo Gentiloni noted the negative impact of the war in Ukraine on the global economy and the eurozone economy, which began to appear with high inflation rates.

He stated that the inflation rate is expected to rise to exceed 6.2% which was recorded last February.

The European Union Commissioner also added that Europe’s economy had recovered strongly after the Corona epidemic crisis at the beginning of the year, which prompted the European Union’s expectations with optimism, as in Romania there was strong economic growth of about 4%.

Oil prices fell this morning, Monday, at the beginning of the first sessions of the week, at the same time that the oil and currency markets are awaiting a new round of negotiations between Russia and its neighbor Ukraine, which is scheduled to start tomorrow, Tuesday.

The oil prices were affected by the continued withdrawal of US stocks, and the release of oil stocks from NATO allies as part of the US agreement with its allies to release 60 million barrels of oil from US oil stocks.

Traders said US oil exports have jumped in the wake of Russia’s invasion of Ukraine and that domestic oil that used to go to the storage hub in Cushing, Oklahoma, is now exported across the Gulf of Mexico coast, as buyers around the world look to get crude from Anyplace in light of the continuing current political and economic tensions.

But on the contrary, growing concerns about a slowdown in oil demand in China, especially after the authorities in Shanghai – China’s largest city – said that they would implement a two-stage closure to contain an increase in cases of the Coronavirus, contributed to the decline in oil prices by about six US dollars.