FX Update: JPY twisting in the breeze on fresh US yield rise. FX Update: JPY twisting in the breeze on fresh US yield rise. FX Update: JPY twisting in the breeze on fresh US yield rise.

FX Update: JPY twisting in the breeze on fresh US yield rise.

Forex 4 minutes to read
John Hardy

Head of FX Strategy

Summary:  The US dollar continues its rise and its strength could deepen and broaden if new highs in US Treasury yields at most key points along the curve unsettle risk sentiment in the days ahead. USDJPY is certainly one yield-sensitive pair to watch as the Japanese financial year draws to a close tomorrow, but EM and commodity currencies could join the rush lower versus the mighty greenback.

FX Trading focus: Fresh highs for most points on the US yield curve support USD, smash JPY

There seemed no specific trigger as US yields rose to their highest level for the cycle into this morning from all points between 5- and 10-years on the US treasury yield curve, helping to drive the ongoing resurgence in the US dollar, particularly against the lowest yielders and those countries whose bond yields are less responsive to the rise in US yields.

Given that the Bank of Japan recently declared a band only 25 basis points either side of zero for the permissible band for 10-year JGB’s (and especially given that 10-year JGB yields aren’t even pressuring the top side of that band – trading overnight just below 10 bps still), the JPY has proven the most sensitive to US longer yield rises and USDJPY has burst above the 110.00 level this morning, a day ahead of the quarter end  and the Japanese financial year end. Some believed that the weakest quarter for US treasuries in over 40 years (assuming we don’t see a massive rally through tomorrow) might see significant portfolio rebalancing into quarter-end, but if that has been the case, it has failed to support the treasury market notably.

The key development to watch in the coming days is whether rising US yields begin to act as a strong headwind for yield-sensitive assets like growth stocks and risk sentiment generally, which could see the USD rise deepening and broadening, adding pressure on the downside for commodity currencies and especially EM currencies. There are signs of this development since this morning here in Europe. In this morning’s Saxo Market Call podcast, we discussed the treasury yield rise, together with the notable ongoing resilience in junk debt despite a torrent of issuance this year, something that continues to signal that financial conditions have yet to tighten meaningfully beyond the rise in treasury yields. Indeed, the Fed may remain dismissive of US yield rises as long as US inflation and especially employment data continue to improve materially in coming weeks and months and  metrics like those credit spreads continue to suggest that all is quiet on the financial stability front.

Chart: USDJPY weekly 
USDJPY breaking key resistance here ahead of the Japanese financial year-end tomorrow, with 110.00 unable to hold as US treasury yields from 5-10 years hit new highs for the cycle overnight. Tonight will be the final day of the Japanese financial year, but we will likely to see any dramatic pivot in the price action here if US yields continue to rise apace, given that the Bank of Japan has already moved to “cap” yields with its declared target of keeping yields within 25 basis points of zero.

Source: Saxo Group

Graphic: FX Board of G10 trends and momentum
In the FX Board we note the mounting USD strength again – likely set to deepen against EM- and commodity currencies if this latest US yield rise extends and unsettles general risk sentiment as was the case at times in the prior episode. Elsewhere, note that SEK seems to have joined the negative yielders EUR and especially JPY and CHF in the weaker column, while NOK has picked up speed again, with EURNOK facing down the cycle lows and the huge 10.00 level again. Interesting to see if that resilience can stick if oil prices dip again amidst a surging US dollar (doubtful). Momentum in CNH is waning as well, after yesterday saw the biggest move lower in the CNH versus the USD in several weeks.

Source: Bloomberg and Saxo Group

Upcoming Economic Calendar Highlights (all times GMT)

  • 1200 – Germany Mar. Flash CPI 
  • 1300 – US Fed’s Quarles (Voter) to speak on Financial Stability Board
  • 1300 – US Jan. S&P CoreLogic Home Price Index
  • 1400 – US Mar. Consumer Confidence
  • 1830 – US Fed’s Williams out speaking on role of small businesses
  • 0030 – Australia Feb. Building Approvals
  • 0100 – China Manufacturing and Non-manufacturing PMI

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article


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/en-gb/legal/disclaimer/saxo-disclaimer)

40 Bank Street, 26th floor
E14 5DA
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

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. Android is a trademark of Google Inc.

©   since 1992