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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
USD/JPY continues to track lower, the pair last in the 139.50/55 region, down a further 0.60% in Asia Pac trade so far. Session lows were marked just under 139.40. We aren't too far off 139.18, a 38.2% retracement of Mar-Jun bull leg. Further south is the 100-day EMA around the 138.30 region.
- Position adjustment, paring of carry trade positions, appears one explanation for JPY strength. Since the start of the month yen is up 3.45%, only bettered by NOK in the G10 space. The yen has been outperforming other higher beta plays though, with AUD/JPY tracking lower for the past 5 sessions.
- Market expectations for the upcoming BoJ meeting at end July remain fairly modest in terms not expecting any meaningful shifts. Still, in recent sessions we have seen Japan yields outperform their US counterparts. Japan's 10yr swap is 0.69%, up nearly 15bps since the start of the month, while the 10-yr US swap is off 12bps since the end of last week.
- The chart below overlays the US-JP 10yr swap spread against USD/JPY. The move lower in the pair looks too large for the relative yield movements, but the spread is trending yen's favour.
- The 10yr government bond yield remains below the BoJ's 0.50% ceiling though, last near 0.47%, which is below earlier YTD highs when the market arguably saw larger risks of a BoJ shift.
Fig 1: USD/JPY Versus US-JP 10yr Swap Spread
Source: MNI - Market News/Bloomberg
- Recent yen strength doesn't appear to reflect renewed risk aversion, see the second chart below of USD/JPY versus global equities.
Fig 2: USD/JPY Versus Global Equities
Source: MNI - Market News/Bloomberg
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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