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Yen Weakens Past 140 Per Dollar as Fed Hike Bets Spur US Yields - BLOOMBERG

MAY 25, 2023

(Bloomberg) -- The yen weakened beyond 140 per dollar for the first time since November as traders moved to price in another Federal Reserve interest-rate increase, underscoring diverging expectations for monetary policy in Japan and the US. 

Japan’s currency slid as much as 0.5% to 140.23 per dollar, touching the weakest since Nov. 23, as two-year Treasury yields surged Thursday.

Traders fully priced in another quarter-point rate increase by the Fed within the next two policy meetings and a more than one-in-two chance that hike could come as soon as next month. The move came on hints of optimism about a potential debt-ceiling deal and economic data suggesting resilience. US officials have failed to resolve their debt-cap impasse even after Fitch Ratings warned the nation’s AAA rating was under threat from the standoff.

“The move to 140 is really a dollar story, not a yen story,” said Bipan Rai, a currency strategist at Canadian Imperial Bank of Commerce. 

The yield on the policy-sensitive two-year note rising nearly 16 basis points to 4.53%.

“When USD/JPY moves it always moves big so we’ll see, maybe we’ll be at 143 next week,” Brad Bechtel, a foreign-exchange strategist at Jefferies. 

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