Japanese Yen attracts fresh sellers as rising US bond yields revive USD demand; BoJ rate hike bets could limit losses
- US President-elect Donald Trump threatened a 100% tariff on the so-called 'BRICS' nations – Brazil, Russia, India, China, and South Africa – if they replace the US Dollar with another currency for international transactions.
- This comes on top of Trump's pledge to impose big tariffs against America’s three biggest trading partners – Mexico, Canada and China – and adds to market concerns about the second wave of a global trade war.
- Investors now seem convinced that Trump's tariff plans and expansionary policy could push consumer prices higher, setting the stage for the Federal Reserve to stop cutting interest rates or possibly raise them again.
- The prospects for a less dovish Fed trigger a fresh leg up in the US bond yields, which assists the USD to recover from a near three-week low and is seen driving flows away from the lower-yielding Japanese Yen.
- Friday's stronger consumer inflation figures from Tokyo, Japan's capital, signaled that the underlying inflation is gaining momentum and backed the case for another rate hike by the Bank of Japan in December.
- BoJ Governor Kazuo Ueda said on Saturday that the next interest rate hikes are nearing in the sense that economic data are on track, though he would like to see what kind of momentum the fiscal 2025 Shunto creates.
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