USD/JPY to soar towards the early May high of 131.35 – Westpac

Bounce in Treasury yields helped USD/JPY back above 130. In the view of economists at Westpac, risks over the week ahead look to be for a run at the early May high of 131.35.

Tight correlation between USD/JPY and the 10 year US-JP yield spread 

“The correlation between USD/JPY and the 10-year US-JP yield spread has been tight in recent months. And with BoJ officials this week once again dismissing talk of e.g. widening the 0% +/-0.25% yield target on the 10yr JGB, this spread remains overwhelmingly driven by the 10yr Treasury yield.”

“With USD/JPY back above 130 for the first time since 12 May, risks over the week ahead look to be for a run at the early May high of 131.35.”