USD/JPY: Yield spreads support some further gains - Westpac

Yield spreads continue arguing for some further gains in USD/JPY though the ongoing threat of risk aversion from e.g. North Korea/ Iran/ US politics etc will continue capping the upside, according to Robert Rennie, Research Analyst at Westpac.

Key Quotes

“With the snap election coming into view the weekend after this, there is another reason for the ¥ to hold ground here. Finally, with US yields failing at the 2.40 level (again) and the Fed circa 80% priced for Dec meeting, it’s hard to see where the driver for the next level higher will come from.”

“Thus we stick with our medium term upside bias on assumption that US data momentum will build into end year; but switch near term bias to neutral.”

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