U.S. bonds lift dollar to a 4-year peak versus yen

U.S. bonds drove currencies on October 20. Remarkably, an increase in long-term rates lifting the greenback to an almost four-year peak against the Japanese yen. However, a decline in shorter-dated yields put it on the back foot versus most rivals.

The Japanese yen and greenback were also under pressure from a global equity rally that weakened demand for assets regarded as safe-havens.

The U.S. dollar hit 114.585 against the Japanese yen for the first time since November 2017. The benchmark 10-year Treasury yields hit a new five-month peak at 1.6630% in Asia.

Meanwhile, higher long-term U.S. yields raise the appeal of those assets to Japanese investors.

But two-year Treasury yields wavered about 0.4016% after bouncing back sharply overnight from Monday’s 19-month peak of 0.4480%, signaling a scaling back of bets for early Fed interest rate hikes.

On Wednesday, the risk-sensitive currencies, the Australian and New Zealand dollars, hit new multi-month highs. In cryptocurrencies, bitcoin hovered near a lifetime high.

The dollar index, tracking the dollar versus rivals, fell 0.12% to 93.698. It fell back toward Tuesday’s low at 93.501, the weakest in October.

The euro increased by 0.15% to close at $$1.1649 from Tuesday, when it boosted to $1.1670 for the first time since September 29.

The British pound surged 0.16% to $1.3810 after hitting a one-month high of $1.3834 in the prior session.

The Australian dollar gained 0.31% to $0.7500, after hitting the highest since July 7 at $0.7505.

The New Zealand dollar boosted 0.32% to $0.7177. It earlier touched $0.7179, the level unseen since June 11.

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