Central Bank Fears Strengthen Yen

Selling the yen on the assumption that Abenomics will work is all well and good. Maybe prime minister Shinzo Abe will succeed in snapping decades of deflation. Maybe the dollar really is, as UBS UBSN.VX -2.73% and others believe, heading to Y110 against the yen.

But there’s a glitch.
Today, if you haven’t noticed, is a pretty darn stressful day. Emerging-market currencies, for example, are getting flayed.

The trigger is a rise in U.S. Treasury bond yields. Now, sometimes, that drags the dollar higher against the yen, just like Abenomics does. It’s certainly dragging the dollar higher against a lot of other currencies. But today, the push higher in the yen, driven by fear that the withdrawal of Fed bond buying could all end horribly, is the greater force. (The Swiss franc, another retreat in shaky times, is also on the up.)

via WSJ

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza