Yen rose rapidly against U.S. dollar due to slower pace of Fed rate hikes

On Thursday, the Japanese yen surged as the dollar showed a decline. The fall of the U.S. national currency is linked to an anticipated slowdown in the pace of further rate hikes by the Federal Reserve system.

Recent statements by Jerome Powell have boosted expectations that the central bank would abandon its previously fast pace of monetary tightening, and traders’ reaction was immediate.

As it was stated by strategist at National Australia Bank Ltd. in Sydney Rodrigo Catril, the dollar is getting weaker as the market participants accept the Chair’s position that turned out to be less hawkish than it was feared. According to his words, the yen pulled ahead amidst a notable decline in 10-year Treasury yields.

At the same time, Aninda Mitra, a macro and investment strategist at BNY Mellon Investment Management in Singapore, considers it would require more time for a prolonged dollar decline to take place. In his opinion, there are now no guarantees that a range of events necessary for a long dollar decline would happen soon enough. From his point of view, two main factors of the decline are reaching of the U.S. rate peak and China reopening.