U.S. bond yields rallied this morning on the US data still reflecting underlying inflation pressures but came off the highs on rumored Asian buying of treasuries. The rise in yields has resumed however with US ten-year bond yields at 4.70% and within striking distance of the highs of 4.705% this morning. This, along with USD/JPY buying from US investment houses earlier, is keeping USD/JPY bid near session highs of 119.77.
The poor data in Japan last night has underpinned expectations that Japanese rates will be low, despite comments from Fukui that appeared to discard the CPI-based interest rate model, suggesting that rates can even be raised if the CPI falls on the year. Still, a move before August is not seen likely, and this is encouraging JPY weakness. A wide variety of dealers still report strong selling interest ahead of 120.00 including numerous corporate and exporter offers ahead of that level.
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