# Yen sinks as rates outlook diverges; NZ dollar tumbles
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-04-10
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Yen sinks as U.S. payrolls data boosts case for Fed rate
Meta Description: The yen weakened against major currencies as U.S. payrolls data supports Fed rate hikes. NZD and AUD also dip amid U.S.-China tensions over Taiwan.
URL: https://financedigest.com/yen-sinks-as-rates-outlook-diverges-nz-dollar-tumbleshtml

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By Kevin Buckland

TOKYO (Reuters) – The yen sank against major peers on Monday after U.S. payrolls data bolstered the case for further Federal Reserve [rate hikes](https://www.financedigest.com/dollar-hits-one-month-high-against-yen-as-traders-bet-on-fed-rate-hike.html "Dollar hits one-month high against yen as traders bet on Fed rate hike"), highlighting a growing disparity with Japan where the central bank continues to pin the benchmark yield near zero.

Meanwhile, the risk-sensitive New Zealand and Australian [dollars weakened amid](https://www.financedigest.com/dollar-outshines-euro-sterling-amid-european-bank-jitters.html "Dollar outshines euro, sterling amid European bank jitters") heightened U.S.-China [tensions over Taiwan](https://www.financedigest.com/biden-begins-fifth-call-with-chinas-xi-looking-to-tamp-down-taiwan-tension.html "Biden begins fifth call with China’s Xi, looking to tamp down Taiwan tension"), with Beijing a key trading partner for the Antipodean nations.

The yen slipped 0.4% against the U.S. dollar to 132.70, extending its decline from Friday, when data showed the U.S. economy continued to add jobs at a brisk [pace in March](https://www.financedigest.com/uk-recruiters-slow-pace-of-pay-growth-in-march-rec-survey-shows.html "UK recruiters slow pace of pay growth in March, REC survey shows").

Ten-year [Treasury yields](https://www.financedigest.com/wall-st-flutters-treasury-yields-ease-as-powell-resumes-testimony.html "Wall St flutters, Treasury yields ease as Powell resumes testimony") reached 3.413% in shortened trading on Friday for the Easter holiday. The yield remained elevated at 3.3719% in Tokyo on Monday, when many markets in [Asia as well as Europe](https://www.financedigest.com/heineken-sees-europe-resilience-offseting-asia-slowdown-risk.html "Heineken sees Europe resilience offseting Asia slowdown risk") will remain closed.

Against the euro, the yen slumped over 0.5% to 144.635. It fell roughly 0.3% versus sterling.

The [dollar strengthened against the yen because of the continued strong](https://www.financedigest.com/dollar-advances-as-strong-u-s-data-backs-higher-rates-backdrop.html "Dollar advances as strong U.S. data backs higher rates backdrop") growth in the U.S. labour market despite [inflation and sharp interest rate rises](https://www.financedigest.com/shares-rise-but-concern-mounts-over-inflation-flare-up.html "Shares rise, but concern mounts over inflation flare-up"), Mizuho analysts Masafumi Yamamoto and Masayoshi Mihara wrote in a client note.

[“Yields in places like the euro](https://www.financedigest.com/euro-zone-bond-yields-fall-as-ecb-policymaker-flags-recession-risk-gilts-eyed.html "Euro zone bond yields fall as ECB policymaker flags recession risk, gilts eyed") area, Britain and Australia will follow U.S. [yields higher](https://www.financedigest.com/wall-street-stocks-power-higher-as-treasury-yields-and-dollar-ease.html "Wall Street stocks power higher as Treasury yields and dollar ease"), so there won’t be a big widening of the yield gap,” they said. Relative to them, [yield spreads](https://www.financedigest.com/german-yields-steady-spreads-tighten-after-recent-repricing.html "German yields steady, spreads tighten after recent repricing") will see a much bigger impact in Japan.

However, the [increase in jobs was less than the prior month and the rise in average hourly wages](https://www.financedigest.com/greece-to-increase-minimum-wage-again-before-election.html "Greece to increase minimum wage again, before election") was less than economists forecast, which the Mizuho analysts said was not consistent with a sustained rise in U.S. yields.

Barring an upside surprise in U.S. consumer price data on Wednesday, the dollar has limited room to rise against the [yen from current](https://www.financedigest.com/yen-trims-gains-as-possible-next-boj-governor-says-current-policy-appropriate.html "Yen trims gains as possible next BOJ governor says current policy appropriate") levels, they added.

New Bank of Japan [Governor Kazuo Ueda](https://www.financedigest.com/japanese-yen-gains-as-ueda-set-to-be-named-next-boj-governor.html "Japanese yen gains as Ueda set to be named next BOJ governor") takes over from Haruhiko Kuroda on Monday, and is widely expected to keep massive stimulus in place for the time being. He will give an inauguration speech at 7:30 p.m. JST (1030 GMT).

Meanwhile, the New Zealand [dollar slumped](https://www.financedigest.com/oil-slumps-on-economic-data-stronger-u-s-dollar.html "Oil slumps on economic data, stronger U.S. dollar") about 0.7% to $0.62325, and the Aussie slipped 0.13% to $0.6665. [Stock and bond](https://www.financedigest.com/stocks-bonds-extend-rally-on-hopes-rate-hikes-ease.html "Stocks, bonds extend rally on hopes rate hikes ease") markets in both countries are closed for the Easter Monday holiday.

The dollar [edged 0.05% higher](https://www.financedigest.com/londons-ftse-100-edges-higher-set-for-fourth-weekly-gain.html "London’s FTSE 100 edges higher, set for fourth weekly gain") to 6.8784 yuan in offshore trading.

China began three days of military drills on Saturday simulating precision strikes against Taiwan, the day after Taiwan President Tsai Ing-wen returned from a brief [visit to the United States](https://www.financedigest.com/king-charles-hosts-first-state-visit-for-s-africas-ramaphosa.html "King Charles hosts first state visit for S.Africa’s Ramaphosa").

In other currencies, sterling slipped 0.02% to $1.2410, while the [euro gained](https://www.financedigest.com/dollar-trims-gains-vs-euro-after-u-s-inflation-data.html "Dollar trims gains vs euro after U.S. inflation data") 0.02% to $1.0899.

(Reporting by Kevin Buckland; Editing by Jamie Freed and Jacqueline Wong)


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