The relationship between the Japanese yen, oil and US 10 year yields
When trading the Yen it is important to be aware of the relationship between the Yen, US10 year yields and oil.
The yen and US 10 year yields
The yield differentials between US and Japanese bonds are for now just seen by the moves in the US 10 year yields. This is because the Japanese 10-year bond is pinned to 0% by the BoJ. So, this means that the US10 y and the US/Japanese 10y bond yield spread is virtually an identical move. This means that when US 10 year yields move up the Yen moves down. When the US 10 year yield moves down the Yen moves up.
The yen and oil prices
As oil prices fall this allows the yen to gain. Conversely, as oil prices rise this pressures the yen. Japan is a net importer of energy so hit energy prices tend to weaken the JPY.
Author
Giles Coghlan LLB, Lth, MA
Financial Source
Giles is the chief market analyst for Financial Source. His goal is to help you find simple, high-conviction fundamental trade opportunities. He has regular media presentations being featured in National and International Press.
