December 6, 2022

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It’s unlikely that USD/JPY move lower is a false dawn

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USD/JPY down 84 pips to 109.81 today

USD/JPY down 84 pips to 109.81 today

Societe Generale Research discusses the ongoing move lower in USD/JPY.

“The yen is, after a period of ignoring the fall in US real yields,
coming home to them with a bang. The chart shows 10yr TIPS and USD/JPY,
which has been very hard to understand since mid-April. Q3 is starting
on a much sounder footing. The caveat is that the fall in longer-dated
US yields at the start of April saw USD/JPY fall from 111 to 107.50,
before the largely unintelligible rally back to 111.60,’ SocGen notes. 

“This could be a false dawn especially if TIPS yields turn
higher and market volatility leaches away again. But that’s unlikely
with Covid concerns, more volatile oil prices, a debate about growth
peaking, and with central bank policies diverging
,” SocGen adds.

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