24 Jun 2013
Flash: Higher US yields supporting USD/JPY - BTMU
FXstreet.com (Barcelona) - Lee Hardman, FX analyst at the Bank of Tokyo Mitsubishi UFJ notes that the US dollar is continuing to benefit from last week’s less dovish than expected FOMC meeting at which Fed Chairman Bernanke set out a clear timeframe for bringing QE to an end.
He continues to add that the announcement has helped to lift US yields to fresh highs this year with the 10-year US Treasury bond yield rising by around 40 basis points since the FOMC meeting leaving it around 100 basis points higher than the intra-day low from early May. In contrast he sees that the Japanese government bond yields have remained relatively stable with the 10-year JGB yield remaining in the rough 0.8% to 0.9% range they have stabilized within since mid-May.
Further, he adds that widening yield differentials between Japan and overseas is encouraging renewed yen weakness with USD/JPY rising back towards resistance from its 55-day moving at around 99.20. He feels that the negative yen impact of widening yield differentials is dominating for now the potential yen supportive impact of more risk-averse trading conditions which could have prompted a further liquidation of speculative short yen positions.
In terms of the latest IMM report to Tuesday of last week revealed that speculative short yen positions had been cut back to their lowest level since early March although they still remain elevated. He writes, “The US dollar is also likely deriving support in the near-term from the repatriation of funds from overseas by US investors as higher yielding emerging market assets continue to correct sharply lower following the less dovish than expected FOMC meeting.”
He continues to add that the announcement has helped to lift US yields to fresh highs this year with the 10-year US Treasury bond yield rising by around 40 basis points since the FOMC meeting leaving it around 100 basis points higher than the intra-day low from early May. In contrast he sees that the Japanese government bond yields have remained relatively stable with the 10-year JGB yield remaining in the rough 0.8% to 0.9% range they have stabilized within since mid-May.
Further, he adds that widening yield differentials between Japan and overseas is encouraging renewed yen weakness with USD/JPY rising back towards resistance from its 55-day moving at around 99.20. He feels that the negative yen impact of widening yield differentials is dominating for now the potential yen supportive impact of more risk-averse trading conditions which could have prompted a further liquidation of speculative short yen positions.
In terms of the latest IMM report to Tuesday of last week revealed that speculative short yen positions had been cut back to their lowest level since early March although they still remain elevated. He writes, “The US dollar is also likely deriving support in the near-term from the repatriation of funds from overseas by US investors as higher yielding emerging market assets continue to correct sharply lower following the less dovish than expected FOMC meeting.”