Update on USDJPY and US Yields

Yields on short-term US Treasury debt have fallen to the lowest in history on mounting expectations of extra stimulus from the Federal Reserve. USD/JPY has been doing nothing but tracking yields which means that until yields bottom, USD/JPY will remain under pressure. I’ve been talking about this for weeks now – here’s an updated chart. If you want to forecast where USD/JPY is headed, just watch how yields respond to payrolls

10 Comments

  1. Very interesting correlation. The Usd/Jpy has been a difficult one to correlate. The other yen crosses correlate vry well to the equity markets. But because of the jpy and the usd both being safe haven category, they dont contrast much vs each other when talking about risk. But you have brought up a very interesting correlation.. how does this hol up on the intraday charts? I see the daily has a very solid correlation..

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  2. Hi.
    I read many of your articles because of your broad fundamental perspective. But I don’t understand why more QE means lower treasury yields. One would expect cheaper money to result in at least higher expectations for inflation, which primarily is what drives bond prices. Isn’t it?

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  3. I don’t think comments from just about any Japanese official will move the market. The market must have (by now) found out that as per Japan’s foreign exchange law, only the Japanese Finance Minister has the real power to order the Bank of Japan to intervene. The rest can talk but only Mr. Noda (or his boss, the Primer Minister.)

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