Rising US rates giving USD/JPY a boost
The historically strong correlation between US interest rates and USD/JPY hasn’t been all that reliable in recent months. 10-year rates have risen by 75bps whilst USD/JPY has been volatile and choppy around 100.00. In fact it was the USD/JPY seemingly leading US rates rather than the other way around.
Friday’s NFP and the srong impact on both US rates and on USD/JPY is being seen by some analysts as a sign that the correlation is back in place. I think I’d like to see a bit more evidence first.
Whilst on US rates, the sharp rise could well impact on any Fed tapering decision. The US economic recovery is being led by a sharp rise in the property market and if interest rates rise and the Fed stops funding the mortgage markets, then this fledgling recovery could be impacted?