Japanese Yen Weakens Against U.S. Dollar as Markets React to Rising Yields

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Japanese Yen Weakens Against U.S. Dollar as Markets React to Rising Yields

The recent weakening of the Japanese yen in comparison to the U.S. dollar has been attributed to the upward trajectory of U.S. yields, resulting in the yen reaching its lowest level in four weeks against the dollar. This shift was observed as investors turned to carry trades, borrowing in low-yielding currencies like the yen to invest in higher-yield currencies, due to the calm state of the markets and the rise in U.S. Treasury yields.

The dollar's climb to 157.41 yen early in the week, albeit more gradually than in previous months, prompted concerns of possible intervention from Tokyo, with the yen facing pressure alongside the Chinese yuan as U.S. easing expectations shifted and bond auctions led to yield increases. Following softer U.S. consumer price inflation data, the dollar initially weakened, but U.S. Treasury yields have since risen, hitting a nearly four-week high at 4.57%, influenced by lackluster government debt auctions and unexpected improvements in U.S. consumer confidence in May. This resulted in the dollar inching back up against the yen, currently at 157.10 yen.