USD/JPY: Widening yield differentials continue to encourage higher levels – MUFG

USD/JPY is moving to within a touching distance of the 150.0 0level for the first time since August 1990. As economists at MUFG note, rising yields outside of Japan are encouraging yen selling.

Bank of Japan remains committed to their YCC policy

“In contrast to rising yields overseas, the BoJ remains committed to their Yield Curve Control policy which is helping to keep the 10-year JGB yield at just above 0.25%. Overnight the BoJ held the first unscheduled bond buying operation this month in response to renewed upward pressure from rising global yields. It has offered to purchase an unlimited quantity of 10-year JGBs at a yield of 0.25%.”

“The widening yield differentials between the US and Japan are continuing to encourage a higher USD/JPY even as the risk of intervention is increasing as the pace of yen weakness has picked up again recently. As we have already seen over the past month though, it is unlikely to reverse the yen weakening trend unless accompanied by a change in fundamentals as well.”