Mizuho Says Yen Slump Defies US-Japan Rate Gap Rulebook at Historic Lows
Updated
Updated · Bloomberg · Jul 1
Mizuho Says Yen Slump Defies US-Japan Rate Gap Rulebook at Historic Lows
1 articles · Updated · Bloomberg · Jul 1
Summary
Mizuho Bank said the yen’s slide to historic lows is undermining one of investors’ main currency-trading frameworks and forcing a rethink of how to read dollar-yen moves.
For years, traders used US-Japan interest-rate differentials as a guide, expecting higher Japanese yields relative to Treasuries to support the yen.
Instead, that relationship has reversed in recent years: the yen has weakened even as domestic yields climbed, breaking a long-standing rule of thumb.
Mizuho said the pattern is not isolated to Japan, with similar disconnects between yields and currencies appearing in some other Group-of-10 markets.