The peak in Treasury yields will mark the high in USD/JPY – SocGen

Yield differentials need to turn down before we buy the Yen, Kit Juckes, Chief Global FX Strategist at Société Générale, says.

There should only be a few more weeks of pain for Yen ‘dip-buyers’

The Yen remains under pressure. Is the end of yield curve control and negative rates priced-in, or is the market getting too bearish of the JPY? I prefer the latter interpretation.

So far, so simple. Tell me when 10-year Note yields will peak and I’ll tell you when USD/JPY peaks.

The chance of NIRP and YCC policies being ditched at the March 19 BoJ meeting has increased, but how will/would markets react? When rates were cut to -0.1% in 2016, the first reaction saw the yen rally, but the backdrop was very different. It may take some time for the penny to drop, but unless confidence that the Fed’s next move is to ease, is seriously tested (and that’s the big tail risk for all markets) then bringing the curtain down on negative rates and yield curve control ought to signal a long-term turning-point for the Yen. There should only be a few more weeks of pain for Yen ‘dip-buyers’.