Market Analytics and Considerations
Key notes
Markets were taken aback when the Bank of Japan modified its yield curve management framework to permit 10-year bond yields to target a spread within and around 0.50%, which is twice the former zone of 0.25%.
As a consequence, the USDJPY as well as other JPY crosses are all dropping fast (increasing the JPY). The USDJPY dropped to a low of 131.986, falling underneath the 200day MA and the 50% median of the year’s narrow trading band (under 132.00)
Remember that not too long ago, the yield difference between “outside international yields” and the comparable JPY yields was expanding and the USDJPY was breaching just above 150 mark. The USDJPY touched a top of 151.938. Since 1990, that was the top rank. Their inflation anxieties within this nation, which were being disregarded, are somewhat alleviated by the stronger JPY. Even so, BOJ Kuroda continued to object,
- It is appropriate to maintain softening policy in place.
- The choice taken today does not signal the end of yield curve control or a shift in policy.
- It is too soon to discuss modifying the current monetary policy
- We can talk about timing of leave if likelihood of meeting 2% inflation target increases.
The 2% benchmark must still be attained in a sustainable manner.
The AUD and NZD are the two most-feeble currencies. The USD is stronger versus the AUD & NZD and very little changed versus the EUR, GBP, CHF, and CAD.
