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Japanese Yen Rises As Sentiment Sours On Spike In Bond Yields

japanyen sep19 19mar21 lt

The Japanese yen erased its early losses against its key counterparts in the Asian session on Friday, as investors turned cautious following a surge in U.S. treasury yields in reaction to the Fed's decision to allow inflation to accelerate more than normal.

U.S. Treasury yields steadied after a spike sent the benchmark 10-year yield to 1.75 percent for the first time since January 2020.

Asian stock markets are mostly lower, tracking weak cues from Wall Street overnight, amid concerns that a faster inflation will dampen the global economic recovery.

Investors shrugged off the Bank of Japan's policy announcement to slightly widen the target band for 10-year yields and removal of a pledge to buy exchange-traded funds at an annual pace of 6 trillion yen.

At the conclusion of its two-day monetary policy review, the central bank left the key rate unchanged at -0.1 percent.

The central bank decided to continue to purchase necessary amount of Japanese government bonds without setting an upper limit so that 10-year JGB yields will remain at around zero percent.

The bank said it will allow the range of 10-year JGB yields to fluctuate between plus and minus 0.25 percent from the target level.

The BoJ scrapped its average exchange traded fund, or ETF, buying target of JPY 6 trillion and pledged to buy them only "as necessary".

The bank said it will buy ETFs and Japan real estate investment trusts as necessary with upper limits of about JPY 12 trillion and about JPY 180 billion, respectively.

Data from the Ministry of Internal Affairs and Communications showed that Japan consumer prices fell 0.4 percent on year in February - in line with expectations and up from -0.6 percent in January.

Core CPI, which excludes volatile food costs, also was down an annual 0.4 percent. That also matched expectations and was up from -0.6 percent in the previous month.

The currency has been trading higher on Thursday, as rising treasury yields dampened risk sentiment.

The yen gained 0.3 percent to 129.65 against the euro, from a low of 130.00 seen at 11:30 pm ET. The yen is likely to face resistance around the 124.00 region, if it gains again.

After dropping to 109.12 at 11:30 pm ET, the yen turned higher against the greenback, rising 0.3 percent to 108.78. The yen is seen locating resistance around the 104.00 mark.

The yen added 0.3 percent to touch a 2-day high of 151.33 against the pound, following a drop to 151.81 at 6:15 pm ET. Immediate resistance for the currency is found near the 151.61 level.

Having declined to 117.63 at 11:30 pm ET, the yen briefly rose to 117.36 against the franc. Further rally in the currency may challenge resistance around the 112.50 region.

The yen was up at a 2-day high of 84.22 against the aussie, reversing from a low of 84.60 set at 5:30 pm ET. The pair was worth 84.45 when it closed deals on Thursday. Extension of the yen's uptrend may lead it to a resistance around the 82.00 region.

Data from the Australian Bureau of Statistics showed that Australia retail sales plunged a seasonally adjusted 1.1 percent on month in February - coming in at A$30.192 billion.

That missed expectations for an increase of 0.4 percent following the 0.3 percent gain in January.

The Japanese currency approached 87.00 against the loonie, rising from a low of 87.30 recorded at 9:55 pm ET. At yesterday's trading close, the pair was quoted at 87.17. Should the yen rises further, 85.00 is possibly seen as its next resistance level.

The Japanese yen edged up to 77.97 against the kiwi, after having fallen to 78.19 at 11:40 pm ET. The yen may possibly face resistance around the 76.00 level.

Looking ahead, Canada retail sales for January will be published in the New York session.

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