

USD/JPY price analysis: yen rallies as US yields and dollar collapse

Key points - USD/JPY down more than 100 pips in the last week - US Treasury yields fell below 4% again - US dollars, yields positively correlated - Yields higher, dollar higher, vice versa - 66% of USD/JPY traders are short US yields' effect on dollar-yen In recent developments, US Treasury yields have dipped below the 4% mark once again. These yields are a significant indicator of investor sentiment and economic health, often reflecting the level of risk that market participants are willing to accept. Typically, Treasury yields and the US dollar share a positive correlation, meaning that when yields rise, the dollar often strengthens, and conversely, when yields fall, the dollar tends to weaken. This correlation is crucial for traders to understand, as it can influence the USD/JPY exchange rate. When US Treasury yields are higher, they can attract investors looking for a safer asset with a reasonable return, thus increasing demand for the dollar. In contrast, lower yields can deter investors, leading to a decrease in the dollar's value. Currently, an overwhelming majority of IG USD/JPY traders - 66% - hold short positions, betting on a continued decline of the dollar against the yen. This sentiment reflects a broader market expectation that the dollar may face further headwinds in the short term. Traders taking short positions anticipate that they will be able to buy back the currency pair at a lower rate in the future, capitalizing on the downward trend. The current scenario presents both opportunities and challenges for traders. While a falling dollar can signal potential for short positions, it is also essential for traders to conduct thorough analysis and remain vigilant to market trends and economic indicators. Keeping an eye on factors such as Federal Reserve policies, geopolitical events, and other economic data that can influence Treasury yields will be crucial for informed trading decisions.

Learn more

Disclaimer:

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. See our Summary Conflicts Policy, available on our website.

Publication date:

2024-02-12 14:23:07 (GMT)

The terms and conditions of use set out below (referred to as "FX Blue's Terms"), form a contractual agreement governing FX Blue's relationship with you in relation to your use of this Website (“Agreement”) and you agree to be legally bound by FX Blue's Terms just as if you had signed this Agreement. By using this Website and any Information, you are agreeing to comply with and be bound by FX Blue's Terms, including any revisions that may be made to FX Blue's Terms from time to time. FX Blue reserves the right, in FX Blue's sole discretion, to change, modify, add or remove portions of FX Blue's Terms at any time by posting the revisions on the Website. You should check FX Blue's Terms periodically for changes as by using the Website after FX Blue posts any changes to FX Blue's Terms, you are agreeing to accept those changes, whether or not you have reviewed them, and you waive any right you may have to receive individualised notice of such changes. FX Blue's Terms may be supplemented by additional terms and conditions pertaining to specific content and activities. You agree and understand that such additional terms and conditions are hereby incorporated by reference to FX Blue's Terms. Your continued use of the Website means that you accept any new or modified FX Blue Terms.