News: FOREX-Yen wallows as Omicron fears subside and rate hikes loom

The yen was pinned near a five-year low on the dollar on Wednesday and nursing losses on other crosses as traders wagered the Bank of Japan would lag a looming wave of global policy tightening as inflation gallops ahead around the world.
The yen JPY=EBS tumbled through support around 115.50 per dollar on Tuesday to hit the five-year trough at 116.35. It last sat at 116.15 per dollar. It also dropped through its 200-day moving average to a two-month low of 131.45 per euro EURJPY= and was hovering at 131.06 per euro early in the Asia session.
The yen fell to a more than six-year low against the Swiss franc CHFJPY= and a seven-week trough on the Aussie AUDJPY= .
"Sharply higher COVID-19 case numbers in the U.S. (and a little higher in China) appear to be primarily boosting supply-chain concerns and fears of higher inflation in the U.S., rather than boosting growth concerns," said Nomura economist Andrew Ticehurst.
This has led to a sharp jump in U.S. Treasury yields in the first trading days of the year and the widened gap on Japanese yields - anchored by the central bank - has hurt the yen.
The euro EUR=EBS hovered near a two-week low against the dollar at $1.1279. The risk-sensitive Australian and New Zealand dollars also resumed an attempt to rally as fears of Omicron derailing the world's recovery subsided.
The kiwi NZD=D3 last bought $0.6819 and the Aussie AUD=D3 $0.7236. Both remain shy of resistance around $0.6857 and $0.7270 respectively. The U.S. dollar index =USD was rangebound at 96.313.
Sterling, meanwhile, has rallied 2.7% in a dozen trading days since Dec. 20 as traders also reckon surging Omicron cases in Britain won't deter the Bank of England from lifting rates. The pound GBP=D3 last bought $1.3527.
Minutes from the Federal Reserve's December meeting, due to be published at 1900 GMT, could underscore U.S. policymakers' newfound sensitivity to inflation and their readiness to act. Partial U.S. labour data on Wednesday and non-farm payrolls on Friday will also be watched for a guide to the trajectory.
Fed Funds futures 0#FF: show traders see rates lifting off by May. Analysts at Standard Chartered now expect 25-basis point hikes in March and June rather than one hike in September.
U.S. two-year US2YT=RR and five-year US5YT=RR yields stand near pandemic highs and benchmark 10-year yields US10YT=RR are up more than 14 basis points this week.
Against that leans some element of caution as markets remain thinned by holidays.
"Despite the explosive rally in USD/JPY, I still can't get excited about the idea of a stronger USD right now," said Brent Donnelly, trader and President at analytics firm Spectra Markets.
"The rates move certainly has grabbed everyone's attention but it's hard to know how much to read into a move on the first trading day of the year. The big question remains: Can the Fed hike more than a few times without breaking everything?"
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	Currency bid prices at 0059 GMT 
 Description	  RIC		 Last		   U.S. Close  Pct Change	 YTD Pct	 High Bid	Low Bid 
											  Previous				   Change				  
											  Session											
 Euro/Dollar	   EUR=EBS	$1.1277		$1.1286	 -0.08%		 -0.80%	  +1.1286	 +1.1277 
 Dollar/Yen		JPY=EBS	116.2050	   116.1450	+0.08%		 +1.06%	  +116.2350   +116.1200 
 Euro/Yen		 																			 
 Dollar/Swiss	  CHF=EBS	0.9168		 0.9167	  -0.03%		 +0.47%	  +0.9168	 +0.9160 
 Sterling/Dollar   GBP=D3	 1.3529		 1.3527	  +0.03%		 +0.05%	  +1.3535	 +1.3528 
 Dollar/Canadian   CAD=D3	 1.2701		 1.2706	  -0.07%		 +0.42%	  +1.2706	 +1.2697 
 Aussie/Dollar	 AUD=D3	 0.7238		 0.7239	  +0.01%		 -0.41%	  +0.7244	 +0.7233 
 NZ				NZD=D3	 0.6812		 0.6809	  +0.10%		 -0.42%	  +0.6820	 +0.6802 
 Dollar/Dollar																				   
All spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX
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World FX rates	https://tmsnrt.rs/2RBWI5E 
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