Dollar Sinks Most Since September Versus Yen as Yields Decline

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  • U.S. currency tumbles versus most major counterparts
  • Greenback’s three-week rally versus yen was biggest since 1995

Why Traders See Trumponomics Looking Like Reaganomics

The dollar posted its biggest decline against the yen since September as a decline in Treasury yields sapped demand for the U.S. currency.

The greenback slid after capping its biggest three-week rally versus its Japanese counterpart since 1995, as an indicator called the relative strength index signaled the dollar had risen too fast. Treasury yields fell, with futures indicating that traders see a 100 percent chance the Federal Reserve will raise interest rates next month. The benchmark 10-year note yield had surged this month amid speculation President-elect Donald Trump will pursue reflationary policies.

“Dollar-yen looks to be struggling as the 10-year Treasury note opens for the week with a further step lower in yield,” said Sean Callow, senior strategist at Westpac Banking Corp. in Sydney. “Any signs that Treasuries’ Trump tantrum is waning will hurt yield-sensitive dollar-yen.”

The dollar dropped 1.1 percent to 111.94 yen as of 5 p.m. in New York, after reaching an eight-month high of 113.90 last week. The pair’s 14-day RSI was about 72, after jumping to 85 last week, its highest in more than two years. Readings above 70 indicate to some traders that an asset, in this case the dollar, has been pushed too far and may retreat.

“You can only sell or buy something for the same reason for so long,” said Stuart Bennett, head of Group-of-10 currency strategy at Banco Santander SA in London. “There’s certainly profit-taking because the dollar has been massively strong, not just since the U.S. election, but realistically it’s been in an uptrend for a month or so before.”