(NB: not sure if this one should've been moved to the "rookies section")
Hi, I am reading an outlook for 2010, and in a comment on 2009, it says that in 2009 the JPY has been primarily guided by the developments in long US rates. Actually it said that there was a positive correlation - it clearly must have something with interest rate differentials to do, but I am not sure how the "mechanics" of this "mechanism" works.
Has anybody followed this? Am I to understand that whenever yields on long term US bonds have gone up, then the yen has gone up also? Is that because the yen is being bought with the money being disinvested in the long US bonds?
Or has the correlation actually been negative? In the sense that you would short YEN to buy long term us bonds whenever the bonds fell in price, to give a more attravtive yield?
(Basically, I'm trying to understand how "long US yields can guide the JPY" - don't really understand it.)
Would appreciate your comments!
Hi, I am reading an outlook for 2010, and in a comment on 2009, it says that in 2009 the JPY has been primarily guided by the developments in long US rates. Actually it said that there was a positive correlation - it clearly must have something with interest rate differentials to do, but I am not sure how the "mechanics" of this "mechanism" works.
Has anybody followed this? Am I to understand that whenever yields on long term US bonds have gone up, then the yen has gone up also? Is that because the yen is being bought with the money being disinvested in the long US bonds?
Or has the correlation actually been negative? In the sense that you would short YEN to buy long term us bonds whenever the bonds fell in price, to give a more attravtive yield?
(Basically, I'm trying to understand how "long US yields can guide the JPY" - don't really understand it.)
Would appreciate your comments!