JGBs dive, dollar index hits three-year high on Bernanke comment

Reuters August 7, 2012, 2:33 am
UK-MARKETS-GLOBAL:JGBs dive, dollar index hits three-year high on Bernanke comment

Reuters © The logo of the Singapore Exchange (SGX) is pictured at its office in Singapore July 25, 2012. REUTERS/Tim Chong

By Masayuki Kitano

SINGAPORE (Reuters) - Japanese government bond prices dived and 10-year JGB futures tumbled a full point, prompting the Tokyo Stock Exchange to temporarily suspend trade as the dollar hit a near three-year high versus a basket of currencies on Thursday.

After the resumption of trade, 10-year JGB futures recouped some of their losses but were still down 0.71 point at 141.19. The 10-year JGB yield jumped to as high as 1.0 percent, its highest level since April last year.

The dollar's rise followed U.S. Federal Reserve Chairman Ben Bernanke's testimony to Congress on Wednesday, in which he said the Fed's massive bond-buying programme would remain in place for now.

But a decision to scale back the $85 billion in bonds the Fed buys each month could be taken at one of the central bank's "next few meetings" if the economy looked set to maintain momentum, he added.

The dollar index, which measures the dollar's value against a basket of currencies, rose to 84.487 as of 0109 GMT, its highest level since July 2010.

Against the yen, the dollar rose 0.4 percent to 103.55 yen, having set a high of 103.74 yen on Wednesday, the greenback's strongest level versus the Japanese currency since October 2008.

After Bernanke's comments the focus will be squarely on forthcoming U.S. economic data, said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo, adding that a trend toward broad dollar strength would probably remain in place.

"I don't think a there will be a change in the trend toward dollar-buying coupled with selling of the yen and Swiss franc," Maeba said, adding that the dollar could rise to 105 yen in relatively short term.

The yen's drop against the dollar boosted Japanese equities, with the benchmark Nikkei share average surging 1.9 percent and touching a 5-1/2 year high.

Some other Asian stock markets fell, however, with South Korean shares down 0.6 percent and MSCI's broadest index of Asia-Pacific shares outside Japan falling 0.8 percent.

U.S. Treasuries extended their losses in Asia in the wake of Bernanke's comments, lifting the 10-year Treasury yield to a two-month high of about 2.069 percent.

In commodities markets, Brent crude fell 0.3 percent to $102.25 a barrel, while gold dropped 0.7 percent to $1,358.36 an ounce.

(Editing by Eric Meijer)


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