Dollar hits one-week high vs yen amid reset in investor expectations

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WASHINGTON — The dollar touched a

one-week high against the yen on Wednesday, boosted by a jump in

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Treasury yields and investor expectations for a rebound in

Chinese growth as COVID-19 curbs loosen.

The dollar rallied by as much as 0.67% against the yen to

134.40 in Asian trading, the most since Dec. 20, when

the Bank of Japan sent the pair spiraling lower with an

unexpected loosening of the 10-year Japanese government bond

yield policy band.

That day, the yen staged its biggest one-day rally against

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the dollar in 24 years, closing 3.8% higher, as traders

speculated about an eventual unwinding of stimulus.

But a summary of opinions from the meeting, released on

Wednesday, showed policymakers backing a continuation of

ultra-accommodative policy, even as they discussed improving

prospects for higher wage growth and sustained inflation next

year.

The dollar was last up 0.55% against the Japanese yen at

134.240.

If yields on Japanese government bonds remain steady, there

will likely be no further pressure on the BOJ “to take another

step,” said Greg Anderson, global head of foreign exchange

strategy at BMO Capital Markets in New York.

“They can just continue to reiterate what they said at the

press conference: this is just a minor technical adjustment.

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We’ve done it before; nothing to see here, folks,” he said.

Throwing a wrench in the works for markets in the final week

of the year is China’s rapid dismantling of the strict

zero-COVID policies that have severely hampered its economy for

nearly three years.

Investors are having to reconcile the pick-up in economic

activity as China’s consumers and businesses return to some kind

of normality while also dealing with the impact of a surge in

infections.

“With infection levels running at many thousands per day,

it’s little wonder that China’s COVID response should top many

analysts’ list of concerns about 2023,” said DailyFX analyst

David Cottle.

Elsewhere, the Australian dollar rose 0.22% against

its U.S. namesake to $0.674, while the New Zealand dollar

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strengthened by 0.65% to $0.632.

The commodity currencies “are reacting a little bit to

the recent uptick in oil, but that’s about it,” said Brad

Bechtel, global head of FX at Jefferies.

“In the square-up process that we’re going through,

probably those currencies have room to drift stronger, still,”

said Anderson.

The dollar index, which measures the U.S. currency

against six major rivals, rose 0.202% to 104.420. It hit a

six-month low of 103.44 two weeks ago, when the Federal Reserve

slowed the pace of its interest rate increases.

Sterling rose by as much as 0.63% on Wednesday

against the dollar to 1.211, as Britain’s markets reopened after

a long weekend, before leveling out. The pound last fell 0.02%

against the dollar at 1.203.

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The euro was down by 0.18% at $1.06225, having

traded steadily around six-month highs in the couple of weeks

since European Central Bank President Christine Lagarde said

that rate hikes would need to continue.

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Currency bid prices at 2:10PM (1910 GMT)

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

Previous Change

Session

Dollar index 104.4100 104.2100 +0.21% 9.144% +104.4700 +103.8300

Euro/Dollar $1.0621 $1.0642 -0.19% -6.58% +$1.0675 +$1.0611

Dollar/Yen 134.2900 133.5100 +0.55% +16.61% +134.4000 +133.4200

Euro/Yen 142.63 142.00 +0.44% +9.45% +142.9400 +141.9000

Dollar/Swiss 0.9281 0.9294 -0.14% +1.75% +0.9307 +0.9247

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Sterling/Dollar $1.2027 $1.2031 -0.02% -11.06% +$1.2124 +$1.2003

Dollar/Canadian 1.3598 1.3524 +0.54% +7.54% +1.3599 +1.3487

Aussie/Dollar $0.6745 $0.6734 +0.16% -7.22% +$0.6801 +$0.6720

Euro/Swiss 0.9856 0.9883 -0.27% -4.95% +0.9903 +0.9844

Euro/Sterling 0.8829 0.8842 -0.15% +5.11% +0.8862 +0.8794

NZ $0.6316 $0.6274 +0.73% -7.67% +$0.6355 +$0.6260

Dollar/Dollar

Dollar/Norway 9.8905 9.8270 +0.60% +12.21% +9.8955 +9.7900

Euro/Norway 10.5071 10.4414 +0.63% +4.94% +10.5135 +10.4312

Dollar/Sweden 10.4598 10.4683 -0.21% +15.99% +10.4875 +10.3669

Euro/Sweden 11.1086 11.1320 -0.21% +8.55% +11.1560 +11.0640

(Reporting by Hannah Lang in Washington; Additional reporting

by Amanda Cooper in London and Kevin Buckland; Editing by David

Goodman, Tomasz Janowski and Chizu Nomiyama)