FX Update: Rising yields continue to pressure JPY, and now CHF? FX Update: Rising yields continue to pressure JPY, and now CHF? FX Update: Rising yields continue to pressure JPY, and now CHF?

FX Update: Rising yields continue to pressure JPY, and now CHF?

Forex 4 minutes to read
John Hardy

Head of FX Strategy

Summary:  The JPY continues to slide in a historic weakening move as US yields press ever higher. The move even accelerated overnight despite fresh verbal intervention from Japanese officialdom. Elsewhere, it is interesting to see the USDCHF breaking the range highs stretching back to early 2020. This could be a delayed reaction to the recent brutal rise in US yields and bears watching, as the franc may have some catching up to do.


FX Trading focus: CHF finally joining the JPY in feeling the pressure from rising yields?

The slide in the JPY took on new energy overnight as USDJPY pulled all the way above 128.00, carving out new 20-year highs, with the next major chart point up at 135.00, the high from early 2002. The move was accompanied by a new modest rise in US long treasury yields, but it seems the situation has developed its own dynamic, and the market was almost thumbing its nose at Japanese officialdom, which overnight escalated its verbal intervention against JPY volatility. The Japanese Ministry of Finance’s Suzuki, who said that the ministry is “monitoring moves in the foreign exchange market with a strong sense of vigilance.” The pressure cooker is set to continue for the JPY until the MoF backs up that strong sense with a few tens of billions of USD in actual currency intervention or, more durably, until the Bank of Japan loosens up its commitment to capping 10-year JGB yields.

Elsewhere, as I discuss below, the Swiss franc is sharply weaker today, a move I can’t help but also attribute in part to the constant pressure from rising yields. Not sure why we are getting the delayed reaction to this now. I have been surprised at EURCHF’s complete lack of correlation with EURJPY of late and its return back lower below 1.0200 recently despite Switzerland joining other countries in sanctioning Russia. The latter seemed to be behind the strong lifting in EURCHF after those sanctions were announced, but then the pair settled back lower and the weekly sight deposits at the SNB have built strongly of late, suggesting that there is some residual safe-haven seeking in the CHF, some of it possibly linked to the French presidential election. If we clear this last hurdle with no Le Pen victory on Sunday and yields continue to lift globally, the CHF could be in for some “catch-up” weakening. For now, USDCHF traders may be front-running this and EURCHF even broke locally higher today.

Chart: USDCHF
Yes, the Japanese yen deserves the bulk of our attention of late as it continues weaker at a breath-taking pace, but the movement today in the Swiss franc is interesting as it may suggest that yield pressures are finally making their mark on the franc as well. Note that USDCHF has broken to its highest levels since early 2020 today, and even EURCHF pulled a bit higher. The next test may be the reaction to the French Presidential run-off on Sunday and whether this is the source of the apparent safe-haven demand into CHF. The weekly SNB sight deposit data showed almost no growth in deposits yesterday after a few weeks of strong builds (as SNB intervened to mute pressure on CHF to strengthen).

Source: Saxo Group

Elsewhere, the price action seems to be wrapped up in risk sentiment, with the USD rising and falling in negative correlation with equity futures. On that front, watching the technically pivotal USDCAD and AUDUSD. The USDCAD rate has backed up into the pivotal 1.2650 area and bears need to take a stand here or they risk capitulation back into the upper zone toward 1.3000. Similar is the case for AUDUSD, where the move off the early 2022 lows is on life support and looks in danger of a complete failure if the 0.7300 area can’t be held. It is still remarkable that EM is in its own world relative to prior market regimes – EM spreads are crushed back to pre-Ukraine war levels and the rate hikes across most of EM have impressed enough to maintain stability and better in all of the biggest EM currencies, TRY excepted (and looking awfully “managed” of late).

Table: FX Board of G10 and CNH trend evolution and strength.
Little new here, although we are tracking the status of the commodity currencies in coming sessions, given the pivotal levels noted above, as well as monitoring the situation in key CHF crosses now that USDCHF has broken higher. Also watching gold after its feint toward 2,000 was rejected overnight.

Source: Bloomberg and Saxo Group

Table: FX Board Trend Scoreboard for individual pairs.
Watching the USDCAD and AUDUSD developments as a measure of the USD outside of the moves in the greenback against the lower yielding currencies, though in fact USDSEK and USDNOK look pivotal here as well.

Source: Bloomberg and Saxo Group

Upcoming Economic Calendar Highlights (all times GMT)

  • 1215 – Canada Mar. Housing Starts
  • 1230 – US Mar. Housing Starts and Building Permits
  • 1605 – US Fed’s Evans (non-Voter) to speak
  • 1630 – Switzerland SNB’s Jordan to speak
  • 2350 – Japan Mar. Trade Balance
  • 0115 – China Rate Decision

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
Beethovenstrasse 33
CH-8002
Zurich
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.