Yen Gains on Haven Demand After Treasury Yields, Equities Slide

  • Drop in commodity prices weighs on Aussie, New Zealand dollar
  • Pound holds near two-month low ahead of Queen’s speech

The yen strengthened against the dollar for a second day as a slide in Asian stocks and Tuesday’s drop in Treasury yields spurred demand for haven assets.

Japan’s currency rose versus all its Group-of-10 peers, following a three basis point-decline in the 10-year Treasury yield. The Nikkei 225 Stock Average halted a three-day winning streak as crude oil’s tumble into a bear market dragged Asian shares lower. The Australian dollar fell to a one-week low while New Zealand’s currency also weakened.

“The pullback in UST yields on the back of lower oil prices has supported the yen,” said Rodrigo Catril, a Sydney-based currency strategist at National Australia Bank Ltd. “Softness in commodities and general market weariness suggest a break” for the Aussie and the New Zealand dollar above 0.76 and 0.73 respectively looks “unlikely near term,” he added.

The pound held near a two-month low before Queen Elizabeth II outlines the new legislative program as part of the ceremonial State Opening of Parliament. Her address will be delivered against a backdrop of growing uncertainty as divorce talks with European Union get under way.

  • USD/JPY falls 0.2% to 111.28
    • There are few reasons to sell USD/JPY aggressively, Naoto Ono, forex analyst at Ueda Harlow Corp in Tokyo, writes in report
    • Adds that because players are taking cue from stock markets while waiting for fresh factors, caution is needed over political developments in the U.K. and U.S. oil inventory moves, which may affect stock prices
  • 10-year UST yield little changed at 2.16% Wednesday
    • Dallas Fed President Robert Kaplan said on Tuesday “muted” 10-year yields suggest expectations for sluggish economic growth, and “I want to take that into account” in thinking about rates
  • AUD/USD weakens for a third day, down 0.1% to 0.7573; reached 0.7563 earlier, lowest since June 14
    • Oil holds slide into bear market as Libya to U.S. raise supply
    • Weak stops on AUD/USD longs under overnight low were the first to be triggered when hedge funds sold down from 0.7580 level, says an Asia-based FX trader who asked not to be identified as the person is not authorized to speak publicly; adds that macro funds offering between 0.7585/95
  • NZD/USD declines 0.2% to 0.7229
    • Average price for whole milk powder declines to $3,022 a ton from $3,143 at the previous auction, according to GlobalDairyTrade website

— With assistance by Michael G Wilson, and Chikako Mogi

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