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Bernanke Strikes Yen Blow

Japanese currency hits 2-year against the dollar on possibility Fed will end bond purchases this year.

By Masaki Kondo, Mariko Ishikawa and Shigeki Nozawa, Bloomberg | Updated on January 07, 2013

While Prime Minister Shinzo Abe piled pressure on the Bank of Japan to weaken the yen last week, the Federal Reserve struck the first blow against the currency.

A signal from Fed board members that they may end bond purchases in 2013 helped drive the yen to a 2½-year low of 88.41 per dollar on Jan. 4, still 15 percent stronger than its decade average. The extra yield on 10-year Treasuries instead of similar-maturity Japanese government bonds reached 1.13 percentage points last week, the most in nine months, attracting funds into dollar assets.

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