16 Jul 2013
Flash: Global factors a positive for USD/JPY – BMO Capital Markets
FXstreet.com (New York) - According to Stephen Gallo at BMO Capital Markets, “In recent weeks Japanese net portfolio flows have if anything become less supportive factor for the JPY.”
Indeed, “Fed anchoring of short-term US rates means longer-term rates can only rise so far, but low rate expectations and better US growth dynamics are a net positive for USD/JPY as bond yields and US stocks can simultaneously remain firm.” Gallo adds.
The Fed is becoming increasingly more proactive in managing “Philips curve-type” trade-off between higher equity prices and higher US bond yields making it less likely that a “1994-style” rise in short-and long-term yields is repeated – Japanese investors abhor global sovereign debt market volatility.
Indeed, “Fed anchoring of short-term US rates means longer-term rates can only rise so far, but low rate expectations and better US growth dynamics are a net positive for USD/JPY as bond yields and US stocks can simultaneously remain firm.” Gallo adds.
The Fed is becoming increasingly more proactive in managing “Philips curve-type” trade-off between higher equity prices and higher US bond yields making it less likely that a “1994-style” rise in short-and long-term yields is repeated – Japanese investors abhor global sovereign debt market volatility.