The Japanese yen held near its weakest levels against the U.S. dollar in almost three years on Tuesday as a relentless increase in Treasury yields widened the yield advantage in favour of the greenback.
The dollar was at 113.19 Yen at 0809 GMT after the dollar touched 113.50 in Asian trading, its weakest since December 2018, so far as only 113.50 is reaching the yen in one session and not touching the euro.
The current weakness of the yen - falling for three weeks - comes at a time when global bond yields have surged due to inflation concerns. Ten-year bond yields topped the U.S. dollar for the first time since May last year, topping 1.60%
The pick-up in market-based measures of inflation expectations and the hawkish shifts from central banks outside of Japan are contributing to the sell-offs in global fixed income markets and the yen, MUFG strategists said in a note, noting that the yen has the strongest correlation with U.S. yields.
A monthly Deutsche Bank Market sentiment survey in October noted that an overwhelming majority of respondents expect U.S. Treasury yields to rise from current levels.
The yen also stayed in sight of a multi-month low against other majors with sterling, the euro and the Australian dollar trading all just off three month highs hit against the Japanese currency the previous day when the Aussie enjoyed its best session against the yen in eleven months.
The dollar index measure the greenback against a basket of other major currencies was at 94.30, not far from a 12-month high in data of 94.504 at the end of September as traders positioned themselves for the U.S. Federal Reserve to announce a drastic reduction of its massive bond buying programme in November.
The primary driver of the move is the further rise in U.S. Treasury yields - so it's a fairly simple story of a widening rates differential. adding to the attraction of the carry trade, said Chief Executive of the National Australia Bank in the Foreign exchange strategy, Ray Attrill.
In cryptocurrencies the Bitcoin edged off a five month high, falling 1.3% in Asian trading to $56,700. Ether the worlds second largest cryptocurrency fell 1.54% to $3,489.