Tom Westbrook

SYDNEY (Reuters – On Wednesday, the yen was at a 5-year low against the dollar and suffered losses on all other cross currencies as traders predicted that the Bank of Japan would fall in the upcoming wave of global policy tightening. Inflation is accelerating around the world.

To reach the five-year bottom at 116.35, the yen plunged below support of around 115.50 per $1 on Tuesday. Last time it was at 116.15 a dollar. Also, it dropped below its 200-day moving Average to a low of 131.45 euro two months ago. It was currently hovering around 131.06 euros in Asia early today.

The Japanese yen saw a six-year-old low against the Swiss Franc, and an eight-week peak on the

Andrew Ticehurst from Nomura said that sharply higher COVID-19 numbers in the U.S. (and somewhat higher in China), seem to be more likely to increase supply-chain worries and fear of higher inflation there than to boost growth concerns.

The U.S. Treasury yields have risen sharply in the first trading day of this year, and the widening gap between Japanese yields (anchored by the central banks) has adversely affected the yen.

Nearly two weeks ago, the euro traded at $1.1279. Omicron fears had subsided and the risk-sensitive Australian dollars and New Zealand Dollars tried again to rally. [AUD/]

Last time, the Aussie was purchased for $0.6819. They are both still below resistance at $0.6857 and $0.7270, respectively. At 96.313, the index was in range.

Sterling has rallied 2.7% over a dozen trading sessions since Dec. 20, as traders believe that Omicron case numbers in Britain will not deter the Bank of England’s decision to raise rates. Last time the pound bought $1.3527

Minutes from December’s Federal Reserve meeting are due to be released at 1900 GMT. They could show that U.S. policymakers have increased their sensitivity to inflation, and they are more ready to act. The trajectory will be influenced by partial U.S. labor data from Wednesday and Friday, as well as non-farm payrolls.

Fed Funds futures suggest traders believe rates will rise in May. Standard Chartered analysts (OTC) expect 25-basis point increases in March and June, rather than one in September.

The yields of the U.S. benchmark 10-year yields have increased by more than 14 basis point this week, and are now at pandemic levels for both five-year and two-year years. [US/]

That said, there is reason to be cautious as holiday spending continues to drop the market.

“Despite the rapid rally in, I can’t get excited over the idea of a strong USD right now,” said Donnelly (trader and President, analytics company Spectra Markets).

The rate move has certainly caught everyone’s eye, but it is difficult to judge how much you can read into an action on the first day of the year. It remains to be seen if the Fed can raise rates more often than once without causing chaos.

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Prices for currency bids at 0059 GMT

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

Previous changes

Session

Euro/Dollar

$1.1277 $1.1286 -0.08% -0.80% +1.1286 +1.1277

Dollar/Yen

116.2050 116.1450 +0.08% +1.06% +116.2350 +116.1200

Euro/Yen

131.05 131.07 -0.02% +0.56% +131.1700 +131.0100

Dollar/Swiss

0.9168 0.9167 -0.03% +0.47% +0.9168 +0.9160

Sterling/Dollar

1.3529 1.3527 +0.03% +0.05% +1.3535 +1.3528

Dollar/Canadian

1.2701 1.2706 -0.07% +0.42% +1.2706 +1.2697

Aussie/Dollar

0.7238 0.7239 +0.01% -0.41% +0.7244 +0.7233

NZ

Dollar/Dollar 0.6812 0.6809 +0.10% -0.42% +0.6820 +0.6802

All spots

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Volatilities

Tokyo Forex Market Information from BOJ