6 May 2015
USD/JPY: Yields are key in spot price - TDS
FXStreet (Guatemala) - All else being equal, the shift in US yields and the widening in US-Japan 10Y spreads seen over the past month are commensurate with a decent move in spot USD/JPY.
Key Quotes:
"With JGBs more strongly anchored by BoJ QQE, US-Japan 10-year spreads have risen nearly 40bps since the start of April. Recent history shows that a +/- 20bps move at least in 10-year spreads is typically good enough to trigger a decent move (+/- 2.5% at least) in spot. For now, USD/JPY seems completely disinterested in the development."
"We think the situation reflects the fact that USD/JPY front-loaded a lot of appreciation in November around BoJ decision to aggressively boost QE, resulting in a period of sustained relative USD/JPY over-valuation compared to our fundamental equilibrium estimate (based on spreads, relative equity returns and terms of trade)."
"A minor over valuation persists today, aided and abetted by relative moves in stocks and terms of trade."
"Based on data since 2012, our FV model has and R2 of 0.84."
Key Quotes:
"With JGBs more strongly anchored by BoJ QQE, US-Japan 10-year spreads have risen nearly 40bps since the start of April. Recent history shows that a +/- 20bps move at least in 10-year spreads is typically good enough to trigger a decent move (+/- 2.5% at least) in spot. For now, USD/JPY seems completely disinterested in the development."
"We think the situation reflects the fact that USD/JPY front-loaded a lot of appreciation in November around BoJ decision to aggressively boost QE, resulting in a period of sustained relative USD/JPY over-valuation compared to our fundamental equilibrium estimate (based on spreads, relative equity returns and terms of trade)."
"A minor over valuation persists today, aided and abetted by relative moves in stocks and terms of trade."
"Based on data since 2012, our FV model has and R2 of 0.84."