Hawkish Powell pushes yen past 120 barrier By Reuters

By Tom Westbrook

SINGAPORE (Reuters) – The yen fell through the psychological 120 level for the first time since 2016 on Tuesday, after a hawkish speech from Federal Reserve Chair Jerome Powell raised bets on higher U.S. interest rates and widened the policy gap on a dovish Bank of Japan.

The yen fell about 0.4% to briefly hit 120.08 per dollar in early Asia trade. It is down about 4% this month as leaping U.S. yields have lured flows from Japan.

“Widening policy divergence is continuing to push the yen to more deeply undervalued levels against the U.S. dollar,” MUFG currency analyst Lee Hardman said.

The dollar was broadly stronger elsewhere and pushed the euro down 0.2% to $1.0992.

U.S. bonds and interest-rate futures took a further flogging overnight after Powell said policymakers needed to move “expeditiously” and put the possibility of 50-basis point (bp) rate hikes on the table.

Fed funds futures moved to price in an almost 2/3 chance of a 50 bp hike in May and now anticipate the benchmark rate – currently below 0.5% – exceeding 2.5% in 2023.

Benchmark 10-year yields rose 14 bps and, at 2.0914%, the gap on anchored 10-year Japanese yields is the widest in more than 2-1/2 years. [US/][JP/]

The moves lent broad strength to the dollar elsewhere, as have nerves about the intensifying war in Ukraine which is lifting oil prices back toward early-month highs. [O/R]

The Australian dollar was also softer at $0.7386, as was the at $0.6873.

The rose 0.2% to 98.700. Sterling eased 0.2% to $1.3144.

In offshore trade, the was at 6.3739 to the dollar, having pulled back from recent highs and settled in a new range as investors await promised monetary easing. [CNY/]

Although the Chinese central bank left 1-year and 5-year loan prime rates unchanged … on Monday, we still expect the (People’s Bank of China) to lower the reserve ratio requirement by 50 bp again, as early as Q1 2022,” Scotiabank strategist Qi Gao said. “We maintain our short spot position.”

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Currency bid prices at 0106 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.0992 $1.1016 -0.21% +0.00% +1.1026 +1.0981

Dollar/Yen

119.8800 119.4850 +0.32% +0.00% +120.0350 +119.4600

Euro/Yen

131.78 131.59 +0.14% +0.00% +131.9300 +131.6200

Dollar/Swiss

0.9354 0.9337 +0.27% +0.00% +0.9362 +0.9335

Sterling/Dollar

1.3143 1.3169 -0.18% +0.00% +1.3172 +1.3133

Dollar/Canadian

1.2600 1.2597 +0.02% +0.00% +1.2603 +1.2589

Aussie/Dollar

0.7387 0.7400 -0.18% +0.00% +0.7402 +0.7377

NZ

Dollar/Dollar 0.6873 0.6886 -0.17% +0.00% +0.6886 +0.6864

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

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