A Bloomberg article on the Japanese Yen captured my attention while I was checking some quotes for a trade. I can tell you that a number of macro traders on my radar have been busy moving around trying to take advantage of the dollar moves especially the USD/JPY pair.
The Yen depreciates sharply against the dollar and the Euro after the Bank of Japan maintains its policy of negative rates and only modestly tweaks its yield curve control program. At one stage, USD/JPY touched a level it had not reached since October last year. Meanwhile, EUR/JPY hit its highest mark in 15 years.
Here is a section:
The much-anticipated Bank of Japan lift-off didn’t materialize on Tuesday but global bond traders got a taste of what’s to come. The central bank adjusted its yield curve control to allow long-term yields to edge higher while raising inflation forecasts. Treasuries gained as the tweak was less than expected, offering relief for debt markets.
The BOJ’s move while incremental speaks to the pressure that policymakers face to withdraw stimulus as inflation quickens and the yen weakens. The adjustment may yet prompt speculators to test the central bank’s tolerance for higher yields after it characterized 1% as a reference point for the 10-year bond instead of a line in the sand.
The tweak is “a further relaxation and another step in the direction of policy normalization,” said Shane Oliver, head of investment strategy and economics at AMP Ltd. “It’s also gradually removing one source of support for global bonds and is another source of upward pressure on global bond yields.”
Speculation had been building in the run-up to the meeting that the BOJ would initiate a shift to revive the yen, which dropped to a one-year low last week. If the central bank abandons its ultra-loose monetary policy, the move is expected to push up yields across the USD60 trillion global bond market.
