What Is Going on with USD/JPY?
The JPY sell-off seems unjustified based on a very high correlation to relative interest rates: “Well, as long as the correlation with relative rates does not break down completely, then a move higher in USD/JPY should be difficult until the Fed change its policy stance. This is the main reason why we are skeptical about the sustainability of the current JPY sell-off”, writes Danske Bank senior analyst Kasper Kirkegaard.
On the other hand, Kirkegaard admits a breakdown of 2011’s correlations and IMM data shows the market net long JPY. “The coming days and weeks will show if the ‘old’ correlations will hold – we would not bet against it at current spot levels”, he adds.
via Forex Flash: USD/JPY overshooting or JPY changing correlations? – Danske Bank.
