USD/JPY: Leading the fall in the dollar – Ing

The solid current account and the position of foreign assets of the Japanese Yen (JPY) continue to press down the USD/JPY, even while developing a rare decoupling the yields of the US Treasury bonds This year. An increase in BOJ rates in July is still on the table, although the strong profits of the Yen could force a delay, the FX analysts of ING, Francesco Pesole and Chris Turner point out.

The USD/JPY falls while the Yen finds defensive support

“The defensive coverage for the YEN (its great current account and net surplus of foreign assets) has led to the USD/JPY to lead the downward adjustment in the dollar. The negative correlation between the yields of the US Treasury bonds and the dollar is very rare, but it can happen.”

“We doubt that this correlation is with us for a long time, but we suspect that the financial markets will eventually move to a lower USD/JPY and softer bond yields in the second half once the Fed begins to cut.”

“An unexpected risk is that Japan somehow accepts to deliver a weaker USD/JPY as part of the commercial negotiations with the USA. We see possibilities of an increase in rates of the Bank of Japan in July, although strong losses in the USD/JPY could be one of the risks that delay the increase this year.”

Source: Fx Street

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