Yen Rallies Close to a Three-Month High on Declining U.S. Treasury Yields

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Yen Rallies Close to a Three-Month High on Declining U.S. Treasury YieldsThe yen advanced close to its highest level in over three months after U.S. Treasury yields plunged, reducing investor appetite for U.S. holdings.

The Japanese currency edged 0.2 percent higher to 101.33 a dollar at the close of trade in New York. It surged to 101.10 on Monday, its highest level since February 5. The euro fell 0.2 percent to 138.83 yen after earlier declining to 138.55, the lowest level since February 7. The shared currency also declined 0.1 percent to $1.3702.

The yen was further boosted by speculation that the Bank of Japan will retain its monetary stimulus, while the euro was dampened by bets that European Central Bank will loosen its monetary policy when it meets next month.

“Dollar-yen is following today’s rate move, and rates are grinding a little bit lower,” Brad Bechtel, a Stamford, Connecticut-based managing director at Faros Trading LLC in Stamford, Connecticut, told Bloomberg.

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The benchmark US 10-year Treasuries saw yields plunge 0.03 percentage points, or three basis points, to 2.51 percent. The yield had earlier fallen to 2.47 percent, the weakest since October, on May 15.

The Bloomberg Dollar Index, which monitors the U.S. currency against 10 main counterparts, rose 0.1 percent to 1,008.92.

The Australian dollar plunged to its lowest level in two weeks after minutes of the central bank’s May meeting showed that it would retain the interest rates, while the prices of iron ore fell under $100 per ton. The currency declined 0.9 percent to trade at 92.43 U.S. cents.

The decline in the prices of iron ore was fuelled by speculation that the weakening Chinese property market may reduce the demand for iron ore, which is used in making steel used in building construction. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com