Central banks’ efforts to raise interest rates to curb inflation will remain the focus of attention this week. The Federal Reserve and the Bank of England are expected to raise rates at their meetings, and there is a chance the Swiss National Bank will do the same, Reuters writes.
However, little change is expected from the Bank of Japan, which said on Monday it would buy Japanese government bonds worth 500 billion yen ($ 3.70 billion) on Tuesday as part of its policy of maintaining yields. 10-year benchmark at a distance of 0.25 percentage points from the 0% target.
In contrast, the benchmark 10-year US bond yield reached 3.2% at the beginning of Monday, after gaining almost 12 basis points on Friday.
The two – year US yield extended its gains on Friday to 3.194%, the highest level since the end of 2007.
US inflation exceeded expectations on Friday, leading to bets that the Fed will have to raise rates even more aggressively. The market price indicates about two-thirds of the chances of growth by at least 125 basis points in the next two Fed meetings – Tuesday and Wednesday, this week and in July – according to CME’s FedWatch instrument.
This implies an increase of at least 75 basis points, which would be the largest increase in a single session since 1994.
Higher energy prices have also affected Japan’s balance of payments, influencing the yen.
“For the yen, what could have gone wrong went wrong, went wrong and continues to go wrongPaul Mackel, global head of HSBC’s FX research department, said it was important to keep an eye on whether Japanese investors were prepared to take on more currency risk without hedging their portfolios.
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