"The Japanese Yen trades within a hair's width of the critical ¥100 mark against the US Dollar, and recent market moves emphasize that traders should not fight the Bank of Japan. The Dollar/Yen exchange rate has surged following the BoJ's decision to embark on hyperactive Quantitative Easing measures. In effect we can explain recent Japanese Yen weakness (USD/JPY strength) by simply looking at Japanese Government Bonds.
"Why? After over a decade of Zero Interest Rate Policy (ZIRP) in Japan, the Japanese investor has become the largest net-creditor to the rest of the world. In other words—Japanese capital chases higher yields available abroad. We expect yield differentials to continue driving the US Dollar, Euro, Australian Dollar, and other major currencies to fresh peaks against the downtrodden Yen. The short-term correlation between the Japanese Yen and JGB yields trades at its highest in a decade. In other words—don't fight the Bank of Japan."
BY Eddie Staley
"Why? After over a decade of Zero Interest Rate Policy (ZIRP) in Japan, the Japanese investor has become the largest net-creditor to the rest of the world. In other words—Japanese capital chases higher yields available abroad. We expect yield differentials to continue driving the US Dollar, Euro, Australian Dollar, and other major currencies to fresh peaks against the downtrodden Yen. The short-term correlation between the Japanese Yen and JGB yields trades at its highest in a decade. In other words—don't fight the Bank of Japan."
BY Eddie Staley