Yen hits two-month high as bond yields plummet

Yen rose in European trade against dollar for the fifth straight session, marking two-month highs as US bond yields tumble. 

Haven demand is surging on yen as well amid mounting geopolitical tensions around Taiwan ahead of a visit by US officials and Chinese opposition.

USD/JPY fell over 1% to 130.39, the lowest since June 3, after rising 1.2% yesterday, the fourth profit in a row. 

US Yields

US 10-year bond yields fell 2.3% on  Tuesday on track for the fifth loss in a row, marking four-week lows at 2.516%.

A weaker dollar naturally underpin yen's strong gains as the yield gap widens between Japan and the US.

Traders now expect a more bearish pace by the Fed in tightening policies as the US economy faces recession.

Taiwan Tensions

US officials prepare to visit Taiwan today in an official visit, amid strong opposition by Chinese authorities and US attempts to calm Chinese nerves.

However a deliberately obtuse stance by the US on Taiwan makes it more difficult to ascertain the true purpose of the visit.

China responded by imposing new tariffs on Taiwanese goods, with several Chinese military aeroplanes flying near Taiwanese borders. 

Estimates 

Analysts now expect yen to move higher against dollar, potentially breaking the 130 barrier and hitting multi-month highs.