Dollar Advances to Eight Month Peak Against Yen as U.S. Yields Resume Hike

On Friday, the greenback increase to an eight month peak against the yen, as U.S. bond yields resumed their increase in Asia after the market close for  Thanksgiving break in the United States.

The greenback increased 0.3% at 113.710 yen after hitting an 8-month peak of 113.900 yen. It was on track to increase 2.5% during the week.

The euro pushed up 0.1% to $1.0558 to put a bit of distance between $1.0518, its lowest since March hit in the prior day. The common currency was poised for a 0.3% weekly loss.

“We kept expecting the dollar to adjust lower during its bull phase but that has not happened yet, since there has been no real opportunity for selling to take hold,” said Shin Kadota, chief Japan FX strategist at Barclays in Tokyo.

Developing market equities and currencies have been hit hard by the possibility of higher U.S. interest rates and the outlook of U.S. trade protectionism that President-elect Donald Trump had advocated.

For example, on Thursday, the Turkish lira  fell to a record low,  even though the country’s central bank increased interest rates for the first time in approximately three years. The lira was wounded as European Union lawmakers called for a temporary stop to EU membership talks with Ankara.

Some expect an additional sell-off in developing markets to eventually recover demand for the flagging Japanese yen, considered a go-to currency in times of market tumult together with the Swiss franc.

Analysts also pointed to declining expectations towards the Bank of Japan’s monetary easing which until lately had helped the yen depreciate as a factor that bears watching.

“With markets casting doubts on the effectiveness of BOJ’s monetary easing, there are less incentives to go short on the yen,” said Minori Uchida, chief FX analyst at the Bank of Tokyo Mitsubishi UFJ.

The dollar index was steady at 101.720 after increasing to a 13-1/2-year peak of 102.050 overnight. It was en route for a 0.6% increase on the week.

The Australian dollar increased 0.2% at $0.7430. The Aussie has increased  more than 1% during the week, holding its own against the dollar thanks in part to an increase in prices of commodities such as iron ore.

Sterling was stable at $1.2446 and headed for a 0.7% increase on the week.

This month, the pound has been boosted with investor attention turning away from political risks facing Britain – namely its exit from the European Union – and towards risks elsewhere, particularly in Europe.

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