The US dollar has rallied again against the Japanese yen as we are starting to see the trend change truly take off. However, you cannot simply jump in and buy this pair where we are, because we do have the Non-Farm Payroll numbers coming out, and that of course can cause a lot of noise in this pair. Ultimately, this is a market that should be bought on pullbacks because we have clearly seen a massive switch in attitude.
After yields in the United States continued to rise, this is like rocket fuel for this pair, as the market tends to be very sensitive to the spread differential between the United States and Japan and that should continue to be the case going forward. The market is likely to see a lot of volatility.
On Thursday, U.S. Federal Reserve Chair Jerome Powell said the economic reopening could “create some upward pressure on prices.” He said he expects the central bank to be “patient” in terms of acting on policy, even if the economy sees “transitory increases in inflation.”
Powell noted, however, that the recent rise in yields did catch his attention, as have improving economic conditions.
Bond yields rose again following Powell’s comments. The benchmark 10-year U.S. Treasury yield last stood at 1.5762%.
Bond yields in Asia-Pacific were mixed, the yield on the Australian 10-year bond rose to 1.833%. The 10-year Japanese government bond’s yield, on the other hand, slipped to 0.113%.
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