Japanese Yen Advances On Fed Rate Outlook

The Japanese yen climbed against its major rivals during the Asian session on Monday, as investors weighed the impact of a hawkish shift by the U.S. Federal Reserve and focused on upcoming economic data and comments from policymakers for more clues on the timing of tapering and potential rate hikes.

Comments from St. Louis Fed President James Bullard that inflation risks may force the Fed to raise rates as early as next year added to worries.

The rapid economic growth is bringing faster-than-expected inflation, which could warrant a liftoff in late 2022, Bullard said in an interview with CNBC on Friday.

Investors look forward to Fed Chairman Jerome Powell's testimony on Tuesday for more details on the central bank's COVID-19 emergency lending and its asset purchase programs.

The treasury yield curve flattened further with 10-year yields declining to 1.42 percent and 30-year yields dropping below 2 percent.

U.S. bond yields were weighed by falling inflation expectations, which touched around 2.24 percent.

The yen appreciated to near 2-month highs of 87.96 against the loonie, 130.04 against the euro and 118.87 against the franc, from its prior lows of 88.64, 130.89 and 119.57, respectively. The yen is poised to find resistance around 86.00 against the loonie, 128.00 against the euro and 115.5 against the franc.

The yen reversed from its early lows of 152.44 against the pound and 110.26 against the greenback, rising to a 1-1/2-month high of 151.31 and a 1-week high of 109.72, respectively. The yen is seen finding resistance around 149.00 against the pound and 108.00 against the greenback.

Recovering from its previous lows of 82.77 against the aussie and 76.73 against the kiwi, the yen firmed to a 3-1/2-month high of 82.13 and near a 3-month high of 76.22, respectively. Next key resistance for the currency is seen around 80 against the aussie and 74.00 against the kiwi.