Japanese yen firms as US yields drop

USDJPYyielddiff

Safe haven currencies in particular the JPY and CHF remain well supported, with the former resting on its 100 day moving average around 101.10 versus USD. USD/JPY is set to remain under downward pressure but will face some difficulty in sustaining a move below 101.10 unless US bond yields slip further narrowing the US yield differential with Japan; the yield differential between 10 year US Treasuries and 10 year Japanese JGB yields has already dropped by around 89 basis points since the start of the year.

The drop in Japanese equities has also corresponded to upward pressure on the JPY, with the Nikkei among the worst performing stock markets so far this year. The prospect of further equity weakness suggests that JPY will not resume a weaker trend anytime soon.

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