The Japanese yen resumed its slide on Monday morning after the Bank of Japan stepped into the market to defend its implicit yield cap, and bitcoin rose to nearly its highest this year ahead of a week filled with plenty of data to guide markets.
The yen fell to as low as 122.78 per dollar, its weakest since December 2015, giving up its mini recovery from Friday when the Bank of Japan did not step in to defend its target.
However, On Monday morning, the BOJ offered to buy unlimited amounts of 10-year Japanese government bonds (JGBs) at 0.25%, after the 10-year JGB yield crept up to a six-year high of 0.245%.
"While a risk of near-term correction has risen given the rapidity of its ascent, we expect dollar-yen to remain well-supported at high levels," said analysts at Barclays, citing monetary policy divergence and the negative impact from higher commodity prices on Japan's terms-of-trade.
The U.S. Federal Reserve's firmly hawkish stance has markets pricing in an aggressive pace of rate hikes this year, while the Bank of Japan is remaining dovish, particularly given policy markers' fears that higher prices are caused by rising energy costs could hurt the world's third-largest economy.
A senior Japanese government official said on Sunday that monetary policy must remain loose.
While higher commodity prices have pummelled the yen in recent weeks, they have provided a powerful impetus to commodity currencies.
The Aussie dollar was at $0.75115 holding near last week's four-month high, while the Canadian dollar was at 1.2496 per dollar, just off Friday's two-month peak.
Aussie currency watchers are also looking out for Australia's budget on Tuesday. Australia's Treasurer said on Sunday the budget would mark a very significant material improvement to the government’s bottom line.
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One possible headwind for the Aussie is the COVID-19 situation in China after Shanghai said on Sunday it would lock down the city to carry out COVID-19 testing.
The dollar climbed 0.17% on the offshore yuan on Monday morning to 6.394.
Major eurozone economies are due to report inflation figures from Wednesday, and "stronger-than-expected Eurozone CPI will add to rates market pricing for ECB tightening, underpinning the euro," the Barclays analysts said.
The single currency was last at $1.0973, having edged slightly lower in recent days, still under pressure because of the economic impact of the war in Ukraine.
The sterling was 0.1% softer at $1.3168 and the dollar index was steady at 98.909.
Also on Friday this week is U.S. nonfarm payrolls data, though analysts aren't expecting this to have a major effect on U.S. interest rate expectations and the dollar, given the market is already positioned for several rate hikes this year.
In cryptocurrency markets, bitcoin was sitting pretty around $46,800 after jumping to as high as $47,766 in early trading, its highest level since early January. Ether the world's second-largest cryptocurrency was at $3,289.