Japanese Yen Soars, Dollar Drops, Bitcoin Reaches 9 Month High

Currency markets showed cautious optimism after global authorities moved to stem the spread of a simmering banking crisis, with the safe haven dollar under pressure and the yen falling as Treasury yields rose.

The risk-sensitive Australian dollar rose to a two-week high, while the euro rose for the third day in a row.

The Federal Reserve, European Central Bank, Bank of England, Swiss National Bank, Bank of Canada, and Bank of Japan announced a joint action to improve market liquidity over the weekend. This came after Swiss authorities negotiated a buyout of Credit Suisse by UBS at a significant discount and with massive debt writedowns.

The currency market's "initial response has been a 'risk positive' one," Ray Attrill, head of foreign-exchange strategy at National Australia Bank, wrote in a note to clients, citing the yen's fall and the Australian dollar's rebound in particular.

The yen fell 0.6% to 132.59 per dollar as 10-year Treasury yields rose 12 basis points to 3.52 percent to begin the week, moving away from Thursday's low of 3.369 percent.

Last week, the Japanese yen gained 2.5 percent.

The dollar was also weaker overall.

The euro rose 0.17 percent to $1.06885, while sterling rose 0.1% to $1.2190.

The Australian dollar rose 0.3% to $0.6721, having previously touched $0.6743 for the first time since March 7.

Although the banking system is the immediate focus of currency markets, a Fed rate-setting meeting on Wednesday looms large. Traders continue to believe that a quarter-point increase is likely, despite the fact that the global banking sector remains vulnerable to contagion risks.

However, money markets are now expecting rates to peak in May at around 4.79 percent, followed by 72 basis points of declines until the end of the year.

"Renewed – and rising – confidence in the Fed cutting rates this year and well ahead of any other central bank is evidently in the driving seat for now," NAB's Attrill wrote.

"Doubtless if risk aversion develops a much bigger head of steam, this would then come to dominate USD price action."

Bitcoin has taken a breather after reaching a nine-month high of $28,474 on Sunday. It was last traded for $27,888.

Gold dropped 0.8% to around $1,972 per ounce.