About time for JGB fall and USDJPY rise don’t ya think?

Key News

  • The world’s biggest expected swings in foreign-exchange markets and the euro’s record depreciation are prompting Asian exporters to seek currency controls. (Bloomberg)
  • British manufacturing output unexpectedly fell in April. (Reuters)
  • Britons’ expectations for inflation over the next 12 months jumped to 3.3 percent in May, the highest level in nearly two years. (Reuters)

Quotable

“It is the dull man who is always sure, and the sure man who is always dull.”

                           H.L. Mencken

FX Trading – About time for JGB fall and USDJPY rise don’t ya think?

TOKYO, June 11 (Reuters) – Japanese government bonds fell on Friday, with JGB futures sliding from a two-year peak hit earlier in the week as a jump in stocks prompted investors to book profits on a sharp bond rally over the last two months.

Yes indeed, a two-year peak in Japanese Government Bond futures. We think it could be time for money to start flowing out of Japanese bonds and into some relatively riskier investments inside and outside of Japan.

If that proves true, it also means it’s time for the yen to start weakening (USDJPY to start rising) in rapid fashion. We have been expecting the yen to weaken for a while. Of course, in financial services terms we were “just early” with that call. In real life, we have been wrong. But….

…a lot of Japanese money has been hiding in bonds, for good reason: risk. International systemic risk a la Europe and domestic political risk, as in yet another Prime Minister falling on his sword, is plenty of worry if you have real money.

But this morning we have:

  • Falling bond prices, coupled with…
  • Rising stock prices, coupled with…
  • Increasing optimism China can keep the lights on, coupled with…
  • A new prime minister, a man when playing the role of finance minister mentioned something not too long ago about 125 USDJPY

If we take all this “collectively” (a term that has become standard White House vernacular) we may have the fuel available to power a USDJPY rise.

Japanese Gov’t Bonds versus USDJPY versus Nikkei 225 Stock Index Futures Daily:

Key word in all of this is “may.” In a world of rapid ebb and flow from risk appetite back to risk aversion in a seeming nanosecond, the yen has the ability to disappoint in a big whenway.

Happy Friday and enjoy your weekend.

And to those who actually like soccer, or football as the rest of the world properly refers to it—good luck! To UK football fans—win one for BP.