I.D.E.A. Global Focus Dec 4 1998 12:05PM CSTArchives...
Yen to strengthen as Treasuries get less attractive The difference between Japanese and American bond yields has been slimming in the past week. That means the yen is likely to strengthen.
The rally in Treasuries over the past week, and the resulting fall in yields, has coincided with a rise in Japanese government bond yields. Japan decided to issue a slew of new debt, flooding the market and sending yields up.
Historically, Japanese investors are very yield-sensitive. Any steep change in the yield spread is followed by a corresponding move in dollar/yen with a lag time of about five days. When the spread tightens, the yen strengthens. When the spread widens, the dollar strengthens.
The spread between 10-year yields has narrowed to 342 basis points Friday, from almost 400bp about a week ago. The last time that the yield spread got so narrow was in late October and early September of this year. On October 5 the spread narrowed to 339bp, from around 400. October 6 through 8, dollar/yen plummeted to 111.50, from the mid-130s.
InterMoney thinks the exchange rate is set to give a repeat performance in the next few days, although in a less drastic manner.
InterMoney sees dollar/yen falling to 116.30 and even 114.40 at the beginning of next week, from 119.20 Friday.
I.D.E.A. : Fri Dec 4 17:41:26 1998 [GMT]
wallstreetcity.com |
