FOREX-Dollar hits one-week high vs yen, drops against pound as UK markets reopen

BY Reuters | TREASURY | 12/28/22 10:24 AM EST
    (Updates prices, adds FX table, adds analyst comment)
    By Hannah Lang and Amanda Cooper
       WASHINGTON/LONDON, Dec 28 (Reuters) - The dollar touched
a one-week high against the yen on Wednesday, boosted by a jump
in Treasury yields and investor expectations for a rebound in
Chinese growth as COVID-19 curbs loosen.
    Meanwhile, the pound headed towards its largest one-day rise
against the dollar in two weeks as Britain's markets reopened
after a long weekend.
    Gilts, which have not traded since Friday, came under
pressure in line with a sell-off in global government bonds the
previous day, which pushed yields up and further supported the
    The dollar rallied by as much as 0.67% against the yen to
134.40 in Asian trading, the most since Dec. 20, when
the Bank of Japan sent the pair spiralling lower with an
unexpected loosening of the 10-year Japanese government bond
yield policy band.
    That day, the yen staged its biggest one-day rally against
the dollar in 24 years, closing 3.8% higher, as traders
speculated about an eventual unwinding of stimulus.
    But a summary of opinions from the meeting, released on
Wednesday, showed policymakers backing a continuation of
ultra-accommodative policy, even as they discussed improving
prospects for higher wage growth and sustained inflation next
    "It basically confirmed that the BOJ surprise from last week
was a one-off, but from a longer-term viewpoint nobody believes
it," said Osamu Takashima, head of G10 FX strategy at Citigroup
Global Markets Japan.
    The dollar was last up 0.21% against the Japanese yen at
    If yields on Japanese government bonds remain steady, there
will likely be no further pressure on the BOJ "to take another
step," said Greg Anderson, global head of foreign exchange
strategy at BMO Capital Markets in New York.
    "They can just continue to reiterate what they said at the
press conference: this is just a minor technical adjustment.
We've done it before; nothing to see here, folks," he said.
    Sterling rose by as much as 0.63% against the
dollar to 1.211, heading for its largest-one day rise in two
    Throwing a wrench in the works for markets in the final week
of the year is China's rapid dismantling of the strict
zero-COVID policies that have severely hampered its economy for
nearly three years.
    Investors are having to reconcile the pick-up in economic
activity as China's consumers and businesses return to some kind
of normality while also dealing with the impact of a surge in
    "With infection levels running at many thousands per day,
it's little wonder that China's COVID response should top many
analysts' list of concerns about 2023," said DailyFX analyst
David Cottle.
    The dollar index, which measures the U.S. currency
against six major rivals, eased 0.211% to 103.980. It hit a
six-month low of 103.44 two weeks ago, when the Federal Reserve
slowed the pace of its interest rate increases.
    Fed officials, including Chair Jerome Powell, though, have
emphasized since then that policy tightening will be prolonged
with a higher terminal rate, fuelling worries of a U.S.
    The euro firmed by 0.16% to $1.06580, having
traded steadily around six-month highs in the couple of weeks
since European Central Bank President Christine Lagarde said
that rate hikes would need to continue.
    The Australian dollar rose 1.00% against its U.S.
namesake to $0.680, while the New Zealand dollar
strengthened by 1.07% to $0.634.
    Currency bid prices at 9:55AM (1455 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change
 Dollar index                 103.9700       104.2100    -0.21%         8.684%        +104.3600   +103.8300
 Euro/Dollar                  $1.0658        $1.0642     +0.16%         -6.24%        +$1.0675    +$1.0625
 Dollar/Yen                   133.7950       133.5100    +0.21%         +16.21%       +134.4000   +133.4200
 Euro/Yen                     142.62         142.00      +0.44%         +9.44%        +142.9400   +141.9000
 Dollar/Swiss                 0.9259         0.9294      -0.38%         +1.50%        +0.9307     +0.9247
 Sterling/Dollar              $1.2107        $1.2031     +0.63%         -10.48%       +$1.2124    +$1.2003
 Dollar/Canadian              1.3522         1.3524      -0.01%         +6.95%        +1.3540     +1.3487
 Aussie/Dollar                $0.6795        $0.6734     +0.91%         -6.52%        +$0.6801    +$0.6720
 Euro/Swiss                   0.9867         0.9883      -0.16%         -4.84%        +0.9903     +0.9854
 Euro/Sterling                0.8801         0.8842      -0.46%         +4.77%        +0.8862     +0.8800
 NZ                           $0.6342        $0.6274     +1.08%         -7.36%        +$0.6355    +$0.6260
 Dollar/Norway                9.8055         9.8270      -0.32%         +11.19%       +9.8750     +9.7900
 Euro/Norway                  10.4538        10.4414     +0.12%         +4.40%        +10.5048    +10.4312
 Dollar/Sweden                10.4008        10.4683     -0.40%         +15.34%       +10.4875    +10.3669
 Euro/Sweden                  11.0871        11.1320     -0.40%         +8.35%        +11.1560    +11.0640

 (Reporting by Hannah Lang in Washington and Amanda Cooper in
London; Additional reporting by Kevin Buckland; Editing by David
Goodman and Tomasz Janowski)

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