Japanese yen holds at 150 vs. USD on Powell, Treasuries

Yen touches 150 against dollar as Treasury yields soar to 16-year highs

On Friday, the U.S. dollar to yen rate briefly touched the key 150 level, buoyed by the climb in U.S. 10-year Treasury yields toward 5%.

The increase in yields was triggered by comments from Federal Reserve Chair Jerome Powell last Thursday, who indicated that the U.S. central bank is leaving the door open for potential further interest rate hikes, although it will likely pause its tightening cycle at the upcoming FOMC meeting.

The yield on 10-year Treasury bonds, which approached 5% for the first time in 16 years overnight on Friday, saw a 30 basis point increase last week, marking its most substantial weekly surge since April 2022. On Monday, U.S. 10-year Treasury yields rose above 5% for the first time since 2007.

While geopolitical tensions in the Middle East may have driven investors towards safe-haven assets like gold and the Swiss franc, the primary focus in Treasury trading has been on the interest rate outlook in the U.S.

Interestingly, this focus on rates did not translate into a similar boost for the U.S. dollar or the DXY dollar index last week — the dollar made only marginal gains while flirting with the 150 level against the Japanese yen. The 150 mark is widely seen as the threshold at which Japan's Ministry of Finance might intervene to stabilize the yen.

Yen forecast: USDJPY veers closer to 150 mark, stoking MOF intervention rumors

In a comment to Reuters on October 20, Jeremy Stretch, head of G10 currency strategy at CIBC Capital Markets, said the dollar to yen rate hinged on two important factors:

"There is a sense that the market is obviously very mindful that the 150 threshold that we're close to again this morning is a potential precursor for the uncertainty of having the MOF on the other side of it. The other factor is we are still in a situation where we've seen the market remain relatively long on dollars anyway, that resumption of adding to those dollar positions is a tough ask.”

As noted by Reuters, bullish dollar positions — bets on the dollar being stronger than other G10 currencies — have risen this month to the most in a year.

The dollar to yen pair, which rose by as much as 0.14% on Friday to touch 150.00 and was later up 0.1% at 149.935, tends to track 10-year U.S. yields.

Dollar to yen rate: Mizuho Securities says yen could fall further if intervention belief break

Shoki Omori, chief Japan desk strategist at Mizuho Securities in Tokyo, also told Reuters that there could be room for a higher move in the USDJPY rate if the intervention rumors fall apart:

"There is a mindset that the Ministry of Finance will intervene at 150, and that belief has become really sticky. But if that sticky belief breaks, that's going to be interesting. There is room for a big move up in dollar-yen, and it could go quickly.”

Omori added that the next key point would be 155 per dollar — the highest level for the Japanese yen since mid-1990.

At the time of writing on Monday, the USDJPY pair traded at 149.94 (up 0.07% on the day), as per MarketWatch data. The Japanese yen has shed close to 14.4% of its value against the greenback year-to-date.

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