The rise in U.S. long-term yields has paused and appetite for equity risk has returned, while the yen has weakened. With the FOMC at the end of the month approaching, the possibility that yen selling will strengthen again depending on U.S. developments has been suggested.
A shift became apparent from the market's negative reaction through yesterday to episodes when long-term yields exceeded 5%. U.S. long-term yields showed signs of pausing, risk-taking in the equity market picked up and the Nasdaq updated its record high. The 10-year yield was trading around 5.28%, and declines below 5.30% supported stock buying.
The yen weakened broadly. Euro-yen rose with short covering, while dollar-yen moved to recover the ¥158 range. The strong rebound in euro-dollar supported euro-yen, while limiting the downside despite lower dollar interest rates.
Expectations for an FOMC rate hike at the end of the month have declined, and this could affect the outlook of Bank of Japan Governor 植田. Whether renewed selling pressure on the yen against the dollar will intensify will depend on U.S. interest-rate developments, according to the view presented.