The yen fell to its lowest level against the dollar in five years on Friday as analysts said the Japanese currency’s value was further weakened by rising US treasury yields.
One dollar bought 116.29 yen at around 0130 GMT, the lowest rate since January 2017.
The yen, often considered a safe-haven currency, has been on a downward trend since last year as traders have taken a more optimistic stance on the global economy after the shock of virus lockdowns.
“Since we had the hawkish Fed pivot which started in June last year, effectively US treasury yields have been on a rising trend, obviously with a lot of volatility. That has pulled the yen weaker,” Ray Attrill, head of forex strategy at National Australia Bank, told AFP.
The yen had already lost 10 percent of its value against the dollar in 2021, following four years of slow growth.
10-year US treasury yields rose to two percent overnight, Attrill said Friday, noting that the Bank of Japan’s policy pins equivalent Japanese bond yields at zero.
Big rises in oil prices linked to Russia’s invasion of its neighbour Ukraine have also been a negative factor overall for the yen, despite a recent easing of the energy price gains.
“Given the amount of geopolitical stress and negative risk sentiment, you would have thought that the yen would actually be stronger, and displaying more of its safe-haven characteristics. So it’s a little bit of a head-scratcher that that’s not been the case,” Attrill said.
But “the sharp rise in commodity prices, and energy prices in particular, is a big negative in terms of economic shock, in terms of trade shock, for Japan, being such a large energy importer,” he explained.
