US yield rise support for USD/JPY might not last - MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that the scenario of better US data through the remainder of this week would certainly see USD/JPY derive support and over the last five trading days only the pound has under-performed the yen versus the dollar.

Key Quotes

“The 100-level has once again been a tough nut to crack and with long yen speculative positioning close to a record according to weekly IMM data, the appetite for pushing USD/JPY through that key level looks weak. So better US data may see some further upside for USD/JPY over the short-term as long yen positions are unwound.

However, any quick look at a long-term chart of a 2-year yield spread between Japan and the US and USD/JPY will tell you that nominal yield spreads have not been a reliable driver of USD/JPY. Real yield spreads have been much more reliable and the failure of the BoJ to convince the markets that its ‘Comprehensive Assessment’-led change in monetary policy strategy will have much impact on lifting inflation leaves the yen vulnerable to renewed upward pressure.”