Aussie drops after RBA, yen rally continues on lower US yields

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Japanese yen and US dollar banknotes are shown alongside a graph of the exchange rate in this illustrative photo taken June 16, 2022. REUTERS/Florence Lo/Illustration

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HONG KONG, Aug 2 (Reuters) – The U.S. dollar fell to its lowest level in two months against the rally in the Japanese yen, while the Australian dollar fell even after the central bank raised rates, as investors are repositioning themselves for less aggressive interest rate hikes globally.

Nervousness over the impact of an impending visit to Taiwan by US House of Representatives Speaker Nancy Pelosi has also led to safe-haven flows into the yen, while weighing on other Asian and foreign currencies. other risky assets like stocks. Read more

The greenback fell to 130.4 yen in early trading, its lowest since June 3, and was last down 0.55%, leaving it with a drop of more than 4% in the four last sessions.

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“It’s the same old story, with the yen being very sensitive to the spread between US and Japanese government bond yields. Of course, Japanese bonds aren’t moving because of the yield curve control policy. Japanese rates, but U.S. yields have come down a lot,” Redmond said. Wong, market strategist at Saxo Markets Hong Kong

The benchmark 10-year Treasury yield fell to 2.516%, its lowest since April, on Tuesday. Investors are beginning to position themselves for the US Federal Reserve to move away from aggressively raising interest rates to fight inflation and become more concerned about an economic slowdown.

Wong said this revision to the Fed’s rate hike forecast was likely overdone and lower energy prices also helped the yen, since Japan was a net importer of energy. The currency was also benefiting from some safe-haven inflows due to concerns over Pelosi’s visit.

In a similar vein, the Australian dollar fell 1% after the Reserve Bank of Australia raised rates by 50 basis points to 1.85%, in line with expectations. The bank said that while further tightening was expected, it was not on a predefined path. Read more

CBA analysts said in a note to clients that the central bank’s remarks implied “a pragmatism in how the RBA will take policy decisions over the period ahead. We don’t think they are in a rush. to take the policy rate well above their estimate of neutral”. (about 2.5%).”

China’s offshore yuan touched 6.7957 to the dollar on Tuesday, its weakest level since mid-May. Wong attributed that in part to tensions around Pelosi’s visit as well as poor economic data from China over the weekend.

The Taiwanese dollar slipped to its lowest levels in more than two years, as the dollar climbed 0.2% above the symbolic level of 30. (.TWII)

The greenback was also weaker overall, with the pound at $1.225, just off a five-week high hit overnight, and the euro also ahead at $1.0274.

That sent the dollar index, which measures the greenback against six peers, down 0.19% to 105.2, a one-month low.

Bitcoin was softer at $22,900.

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Reporting by Alun John; Editing by Bradley Perrett and Stephen Coates

Our standards: The Thomson Reuters Trust Principles.

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