In brief from an SG report:
- If we are going to see 10-year Note yields break 2% and the market price in a higher terminal Fed Funds rate (which seems highly likely) then USD/JPY 116 is going to break again and a move towards 120 will follow
- For now, and all the more so given the price of oil and other commodities, the yen seems bound to remain cheap and get cheaper
- USD/JPY can trundle to 120 and interruptions on days of higher volatility are likely to be temporary
Policy divergence ahead between the Fed and BOJ is a tailwind for USD/JPY:
