Speculation on the part of investors that the Bank of Japan will be quicker in withdrawing emergency stimulus than the US seems to be continuing to drive strength in the yen. It is possible that the Bank of Japan will be faster, but I think a more interesting factor is the yield difference between 10-year Treasuries and similar maturity Japanese government bonds – the yield advantage on the US Treasury narrowed to 1.92% from 2.01% at the end of last month. The appeal for US securities and dollars is diminished as investors want higher yielding currencies and assets.
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