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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
JPY
All of G10 FX is being influenced by US yields, but the correlation with USD/JPY remains the strongest
- The chart below plots the correlation between G10 FX pairs and the US 10yr nominal yield, for the past 30 days.
- USD/JPY's correlation is the highest, in absolute terms, at 93%. This is followed by EUR at 80%.
- The strength of the correlation between US yields and USD/JPY has arguably been reinforced by yesterday's dovish BoJ decision, with seemingly little prospect of a hawkish shift from the BoJ in the near term.
- The continued focus on YCC will keep interest rate differentials driven by the US leg.
- Japan's negative external trade position is another headwind, at the country's terms of trade has been hit by surging commodity prices. This is not a short term driver though, particularly compared to US yield moves.
- All of this comes as the market tests the authorities resolve and whether we see intervention to curb the yen's rapid descent.
Fig. 1: G10 FX Correlation With U.S. 10yr Yield - Last 30 Days
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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