Intraday Market Thoughts

USD/JPY Rallies as Bonds Bleed

by Adam Button
Mar 14, 2012 23:05

The US dollar rallied on Wednesday as QE3 expectations were scaled back and Treasuries tumbled. The Australian and New Zealand dollars sold off as dollar-based carry trades were unwound. Australian inflation expectations are the highlight of Asia-Pacific trading. More on rising bond yields and the technical relationship with stocks and USD is found in todays Premium Intermarket Insights below.

US yields rose to 3-5 month highs across the curve as bonds slumped. The weight of better US data and the lack of dovish hints from the Fed have

prompted bond bulls to throw in the towel.

Technically, the damage is likely in the early stages as yields closed above their respective 200-day moving averages for the first time in months. Rising yields due to better growth prospects correlate well with higher USD/JPY. The pair climbed to 83.84 the highest since April. More on rising bond yields and the relationship with stocks and USD is found in todays Premium Intermarket Insights.

Economic data was light but a higher US Q4 current account deficit is likely to drag on GDP and lower-than-expected import prices point to continued benign inflation. A new report from the OECD said G20 Q4 growth was 0.7% compared to 0.9% in Q3. The numbers highlight the divergence in the US economy compared to the Europe and emerging markets.

Asia-Pacific Preview

The calendar is busy but there is probably nothing that will impact the market. Australia releases March consumer inflation expectations at midnight GMT after a 2.5% reading in February. At the same time, New Zealand consumer confidence will be released.

Early in European trading, the SNB will release its Libor target and offer an update on the EUR/CHF peg. Market participants bid up the pair to 1.2140 on Wednesday in anticipation of activist musings or an outright hike in the peg.

For intermarket charts yields, gold, S&P500 and the USD as well as the latest trades on euro, cable, gold and silver, find direct Access here: Nonsubscribers can go here:


Latest IMTs