SINGAPORE/TOKYO, July 29 (Reuters) – The Japanese yen headed toward its best month in almost three years on Friday as growth worries have driven U.S. yields sharply lower and squeezed speculators out of crowded short yen positions.
Waves of buying lifted the yen about 1% in the Asia session, extending Thursday’s gains. It is up 2% for July and touched 132.76 per dollar, a six-week high.
The yen often tracks moves in Treasury yields, particularly the 10-year yield. A wide gap against anchored Japanese yields has made it attractive for Japanese investors to own U.S. bonds and for others to short the yen against the dollar.
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But that gap has narrowed about 30 basis points in July, the sharpest move since March 2020, as signs of both U.S. growth and interest rate rises slowing rallied Treasuries.
On Thursday data showed the U.S. economy unexpectedly contracted last quarter and on…