Yen slides further to 151 per dollar, pound falls on UK turmoil

THE yen was on track for its 10th straight weekly decline against the relentlessly strong dollar on Friday (Oct 21), while sterling fell as political turmoil once again gripped Britain.

The dollar gained across the board, also pushing the Swiss franc to its lowest level since May 2019.

Investor bets on the US Federal Reserve ratcheting up interest rates as high as 5 per cent by next year supported the greenback, as well as company demand for dollars to settle year-end accounts, currency analysts said.

The dollar index – which tracks the currency against six major counterparts – gained 0.5 per cent to 113.440, as US Treasury yields climbed to new multi-year peaks.

The dollar-yen currency pair is extremely sensitive to changes in US 10-year yields, which pushed to a more than 14-year top of 4.291 per cent.

An extended yen sell-off past 150 yen per dollar to 32-year lows has put markets on heightened alert for further intervention in currency markets by Tokyo.

Japanese finance minister Shunichi Suzuki said on Friday authorities were dealing with currency speculators “strictly”, while Bank of Japan governor Haruhiko Kuroda said the central bank would closely watch the impact of currency moves.

The yen last stood at 151.450 per dollar, down 0.9 per cent on the day.

“Japan’s efforts to highlight that no particular level is being protected means there is scope for this relatively orderly grind higher in USD/JPY to continue,” currency analysts at MUFG said in a note.

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Sterling was also on the back foot, falling more than 1 per cent to a weekly low of US$1.11 as Britain’s ruling Conservative party began scrambling to pick the country’s third prime minister in two months after Liz Truss quit on Thursday.

The currency had leapt as much as 1 per cent the previous day after Truss announced her departure.

The Conservatives, who hold a big majority in Parliament and need not call a nationwide election for another two years, will now elect a new leader by Oct 28. Boris Johnson and former finance minister Rishi Sunak are the early frontrunners.

The euro fell 0.4 per cent to $0.97500, while the Swiss franc fell as much as 1 per cent to a more than three-year low of 1.01230 franc per dollar.

The Swiss National Bank drew more than $11 billion from the US Federal Reserve’s currency swap line facility this week, after 17 parties took part in its dollar auction – which analysts said highlighted dollar demand.

“There’s global demand for dollars, that’s also reflected in Switzerland” said Kenneth Broux, currency strategist at Societe Generale. “Demand for dollars from Swiss institutions has certainly increased.” REUTERS