Yen nurses losses near 3-year lows

London

THE Japanese yen held near 3-year lows versus the US dollar on Tuesday (Oct 12) as a surge in US Treasury yields and rising commodity prices, particularly oil, prompted investors to dump the currency.

In London trading, the US dollar held at 113.28 yen after briefly hitting 113.50 in Asian trading, its highest since December 2018.

The yen's recent weakness - falling 4 per cent versus the US dollar in 3 weeks - comes at a time when global bond yields have surged due to inflationary concerns. Ten-year US yields topped 1.60 per cent for the first time since late May.

It also comes as Japan's new Prime Minister Fumio Kishida said on the weekend that he would not seek to change the country's taxes on capital gains and dividends that has spooked investors and raised concerns about outflows from the stock markets.

"The break-out last week on US yields and the U-turn on capital gains tax issue over the weekend has helped the long stock market and long commodity currency versus yen trades," said Kenneth Broux, an FX strategist at Societe Generale.

The surge in US yields forced investors to dump the yen versus the US dollar, resulting in the second-biggest daily fall in the value of the Japanese currency on Monday.

The yen also stayed in sight of multi-month lows against other majors with sterling, the euro and the Aussie dollar all trading just off three-month highs hit against the Japanese currency the previous day, when the Aussie dollar enjoyed its best session against the yen in 11 months.

But apart from the yen, safe-haven currencies were in demand as global indicators of market sentiment flashed warning signs.

The ZEW indicator of economic sentiment in Germany slipped for the fifth month, the latest in a string of indicators showing supply bottlenecks holding back recovery in Europe's largest economy.

As a result, the euro held near its lowest levels versus the Swiss franc in 2021, falling more than 2 per cent since mid-September.

The dollar index, which measures the greenback against a basket of other major currencies, was at 94.30, not far from a 1-year high of 94.504 touched at the end of September, as traders positioned themselves for the US Federal Reserve to announce a tapering of its massive bond buying programme in November.

In cryptocurrencies, Bitcoin edged off a five month high, falling 1.3 per cent in Asian trading to US$56,700. Ether, the world's second biggest cryptocurrency dropped 1.54 per cent to US$3,489. REUTERS