- The Japanese Yen (JPY) rises for an eighth day
- Japan’s 20-year bond auction demand is the weakest since 2018
- The US Dollar (USD) is falling against its major peers
- US debt worries are in focus
The US dollar against the Japanese yen (USD/JPY) exchange rate is falling for an eighth straight day. The pair fell -0.37% in the previous session, settling on Tuesday at 144.32. At 20:30 UTC, USD/JPY trades -0.61% lower at 143.64 and trades in a range of 143.28 to 144.35.
The Japanese yen is gaining on safe-haven trade amid rising concern over the US debt pile. Meanwhile, Japanese super-long yields have risen to an all-time high following a poor auction. A lack of buyers for the 20-year JGB resulted in the worst auction since 2012.
This marks a dramatic shift in a market traditionally characterized by stability. Japanese bonds have been considered among the safest sovereign debt instruments globally. This collapse in auction demand points to investors reassessing the risk-reward profile of Japanese government debt, raising concerns about Japan’s fiscal sustainability, and could point to the unwinding of the carry trade.
The US Dollar is falling across the board. The US Dollar Index, which measures the greenback against a basket of major currencies, is -0.52% lower at 99.59 at the time of writing, marking a third day of losses.
The US dollar is falling for a third straight day amid concerns over Trump’s tax cut and spending bill. President Trump met with House Republicans yesterday but failed to convince his party to back his sweeping tax bill, with hardliners insisting it doesn’t sufficiently cut funding. I met the bill impasse investors are selling out to U.S. dollars and equities.
Trump’s bill is expected to add $3 to $5 trillion to the country’s debt, already at $36 trillion. US rating agency Moody’s lowered the US credit rating, citing concerns over the size of the debt.
Like Japan, US treasuries dropped after a weak long 20-year bond auction, leaving investors wondering how the US will manage its debt.