USD/JPY: Leading the charge lower in the dollar – ING
|The Japanese Yen’s (JPY) solid current account and foreign asset position continue to pressure USD/JPY lower, even as the rare decoupling from US Treasury yields unfolds. While this divergence may prove short-lived, markets could settle into a lower USD/JPY as Fed cuts materialize later this year. A July BoJ rate hike remains on the table, though sharp yen gains could force a delay, ING’s FX analysts Francesco Pesole and Chris Turner note.
USD/JPY slides as Yen finds defensive support
"The defensive cover for the yen (its large current account and net foreign asset surplus) has seen USD/JPY lead the adjustment lower in the dollar. The negative correlation between US Treasury yields and the dollar is very rare, but it can happen."
"We doubt this correlation will be with us for a long time, but we suspect financial markets eventually shift to a lower USD/JPY and softer Treasury yields in the second half once the Fed starts cutting."
"A left-field risk is that Japan does somehow agree to deliver a weaker USD/JPY as part of US trade negotiations. We see scope for a Bank of Japan rate hike in July, though heavy losses in USD/JPY could be one of the risks that delays the hike this year."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.