ForexLive Asia FX news wrap: Yields on US Treasuries rise sharply

There
was no change to monetary policy from the Bank of Japan today at the
conclusion of their meeting. No change was expected. The Bank did
revise its forecasts for CPI (and GDP) higher for fiscal year ’22
(and also for GDP in ‘22) and also
for CPI higher
for FY’23 (but
not GDP). The higher forecasts were also expected after having been
canvassed extensively in report preceding the meeting. You may recall
other reports from last week saying the BOJ was pondering ways to
convey that it may begin tightening. There was nothing in the
revised forecasts to suggest this sort of communication is in any way
imminent. USD/JPY and yen crosses jumped upon the statement release
and is
back towards (not quite to) 115. There
is more on the BOJ in the bullets above.

Earlier
in the session we had the reopening of US treasury trade, with yields
jumping higher. After Governor Waller of the Fed said last week he
was not thinking about a 50bp hike in March he seems to have ignited
at least some in the markets thinking this could happen (this from
over the weekend, for example: Hedge fund manager Ackman – Fed needs to restore its credibility, 50bp rate hike in March ).

This appears to have contributed,
at least partially, to the jump higher for yields. FX responded,
though, by marking currencies higher against the USD initially.

As
I post the weaker US dollar move has now fully, and very quickly,
reversed. EUR, AUD, GBP, NZD, CHF, CAD are all now getting hit lower
against the US dollar. Yields on USTs are rising yet again. This is also sapping ‘risk’ elsewhere, US equity index futures are being hit on Globex.

As guide
(this’ll be out of date by the time you read it but it’ll give
you an idea of the gains for yield):

• 10
  year higher than 1.85%

• 5
  year 1.64%

• 2
  year 1.05%

Oil
surged higher during the session, Brent
to its highest in 7 years (see
bullets above).

Also, take note of the Russia – Ukraine news (from the New York Times) in the bullets above. Tensions here are not going away any time soon.

EUR/USD as an example of the steep rise for the USD: