Greenback is Recovering
Japanese yen has broadly softened. That’s why, the US dollar has benefited. During the month, JPY has declined 4.5% versus the USD and around 9% versus the CAD. All this attributed to the BoJ’s ultra-loose monetary policy. The spread between the US Treasury yields and Japanese bond yields has grown. 10-year bonds’ spread made up some 230bps, almost the 2-month maximum. A couple of days ago, Bank of Japan decided to purchase unlimited number of bonds in order to maintain low rates. This brought 10-year Japanese bond yield to 0.08%, from 0.105% and yesterday the TMBMKJP-10Y yields lifted 4.23% and closed near 0.0895%.
Neil Mellor (chief currency strategist at BNY Mellon) claimed that Japanese growth and inflation will boost, which in turn will lead to the divergence between the rulers about whether the monetary policy should be changed or not. In that case, the Japanese yen will spike. Alfonso Esparza (market strategist at OANDA) noted that BoJ should be careful with any accommodations, as the yen tends react sensitively to those kinds of changes.