USD/JPY rises amidst surging US Treasury yields and geopolitical tensions
18.10.2023, 16:12

USD/JPY rises amidst surging US Treasury yields and geopolitical tensions

  • USD/JPY trades above 149.80 as US 10-year Treasury bond yield hits its highest since 2007.
  • Housing Starts in the US show a 7% increase, while Building Permits see a 4.4% drop.
  • Fed officials adopt a neutral stance, reducing the chances of a November rate hike.
  • Ex-BoJ Board member Sakurai hints at a potential end to negative rates.

The US Dollar (USD) pares its earlier losses against the Japanese Yen (JPY) and rises above the 149.80 area as the US 10-year Treasury bond yield climbs above 4.913%, its highest level since 2007. Risk aversion dominates the financial markets, though it failed to propel the Yen, as the major gains 0.05%.

US Dollar gains ground vs. Yen as risk-aversion drives the financial markets

US President Joe Biden's visit to Israel aimed to ease tensions within the Middle East spurred an escalation of the rhetoric, with Iran blaming Israel after an explosion at a Gaza hospital, which Biden clarified. Israel's chances of launching a ground attack at Gaza keep traders on edge, as portrayed by US equities posting losses while global bond yields surge.

The latest round of economic data showed that American households remain resilient amid an increase in September’s Retail Sales report. In addition, Industrial Production (IP) expansion portrays the US economy is robust. Wednesday’s economic data in the US revealed that Housing Starts rose 7% in September, while Building Permits plunged 4.4%.

Recent comments from US Federal Reserve officials show they have adopted a more neutral stance, which has diminished the chances for a hike in November, according to the CME FedWatch Tool. Nevertheless, odds for a quarter of a percent increase in January 2024 stand at 51.65%, keeping investors wary of further tightening.

On the Japanese front, an ex-Bank of Japan (BoJ) Board member, Sakurai, said the BoJ could end negative rates before tweaking the Yield Curve Control (YCC). A news article by Bloomberg reported the BoJ would upwardly revise its core inflation forecasts for fiscal years 2023 and 2024.

USD/JPY Technical Levels

 

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