NZD offers highest real yield while NOK offers the lowest - BTMU

Analysts at Bank of Tokyo Mitsubishi explained that they can assess currency performance versus real yields and external positions to garner whether there are any standout currencies that might indicate potential performance going forward. 

Key Quotes:

"Based on real yield levels (2-yr nominal yield average ytd & average annual underlying inflation rate) alone, the New Zealand dollar offers the highest real yield in the G10 space. 

When JPY and NOK are excluded (positioning & ToT factors), NZD is in fact the best performing G10 currency on a year-to-date basis. The impact of the terms of trade influence and hence the external position variable is clear to see for NOK, which based just on real yield is currently offering the worst amongst G10 currencies, at -2.35%. That was at an even worse level a few months ago before Norges Bank signalled a shift in bias away from additional monetary easing. 

However, that shift in Norges Bank policy bias appears fully priced now given NOK is the best performing G10 currency on a one and three-month basis and hence even after the crude oil production deal announced yesterday, we would be wary of NOK continuing to outperform over the coming months. 

Based on our analysis of G10 FX performance relative to real yields and external positions, we would highlight three key conclusions that may prove telling in terms of direction over the coming months."