HONG KONG, March 28 — The Japanese yen resumed its slide this 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, this morning, the BOJ offered to buy unlimited amounts of 10-year Japanese government bonds (JGBs) at 0.25 per cent, after the 10-year JGB yield crept up to a six-year high of 0.245 per cent.

“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 US 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 caused by rising energy costs could hurt the world’s third-largest economy.

A senior Japanese government official said yesterday that monetary policy must remain loose.

While higher commodity prices have pummelled the yen in recent weeks, they have provide a powerful impetus to commodity currencies.

The Aussie dollar was at US$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 to Australia’s budget tomorrow. Australia’s Treasurer said yesterday the budget would mark a very significant material improvement to the government’s bottom line.

One possible headwind for the Aussie is the Covid-19 situation in China, after Shagnhai said yesterday it would lcockdown the city to carry out Covid-19 testing.

The dollar climbed 0.17 per cent on the offshore yuan this morning to 6.394.

Major eurozone economises 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 US$1.0973, having edged slightly lower in recent days, still under pressure because of the economic impact of the war in Ukraine.

Sterling was 0.1 per cent softer at US$1.3168 and the dollar index was steady at 98.909.

Also on Friday this week is US non farm payrolls data, though analysts aren’t expecting this to have a major effect on US interest rate expectations and the dollar, given the market is already positioned for several rate hikes this year.

In cryptocurrency markets bitcoin BTC=BTSP was sitting pretty around US$46,800 after jumping to as high as US$47,766 in early trading, its highest level since early January. Ether the world’s second largest cryptocurrency was at US$3,289. — Reuters