Previous post Next post

Great Graphic: Falling Equities and US Treasuries Blunt Impact of BOJ’s Surprise

Great Graphic: Falling Equities and US Treasuries Blunt Impact of BOJ's Surprise
The yen is the strongest currency today.  Many are still referring to it as a safe haven.  However, this strikes us as a misuse of the concept.  Investors are not flocking to the yen to find quiet place to ride out the storm.  Rather the yen's strength is a reflection of the turmoil.
As we have explained the yen and euro have been used to finance the purchases of other assets.  As those assets are liquidated, the funding currency is bought back.  The dollar, euro and yen are the most common funding currencies and they are the strongest currencies today, and typically are during periods of market turbulence.
There are two factors we often rely on for helping to determine the yen's direction.  The 10-year bond spread between the US and Japan and the equity market. Both considerations are yen positive today.  The 10-year differential has fallen 12 bp to 1.77%.  The low on January 28 was 1.75%, which was the lowest since late-October.  The S&P 500 has given back nearly all the gains scored in the wake of the BOJ's surprise move at the end of last week.
This Great Graphic show the dollar against the yen since January 20 low near JPY116.00..  The 38.2% retracement is near JPY119.50.  This seems to be the next immediate target.  It t also roughly corresponds with a 61.8% of the Kuroda-induced rally last Friday.    Below there is the JPY118.50-JPY118.80 area.  That corresponds to a 50% retracement of the rally since January 20 and where the dollar opened in Tokyo prior to the BOJ announcement.
 
Full story here Are you the author?
Marc Chandler
He has been covering the global capital markets in one fashion or another for more than 30 years, working at economic consulting firms and global investment banks. After 14 years as the global head of currency strategy for Brown Brothers Harriman, Chandler joined Bannockburn Global Forex, as a managing partner and chief markets strategist as of October 1, 2018.
Previous post See more for 4.) Marc to Market Next post
Tags:

Permanent link to this article: https://snbchf.com/2016/02/chandler-equities-treasuries-boj/

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

This site uses Akismet to reduce spam. Learn how your comment data is processed.