Real yield differentials will continue driving JPY performance – Morgan Stanley
From July 10th up to last Thursday, real rate differentials worked in favour of USDJPY. The perception of a better US economy and the equity market moving away from investing into dividends towards pushing funds into cyclicals pushed US real rates up. Around the same time, 10-year US real yields rebounded from -10bps to +5bps. Simultaneously, Japan’s real yields moved lower due to rising inflation expectations pushed higher not only by progressive fiscal and monetary easing expectations, but also by higher oil and commodity prices.
