Global markets may be feeding on BoJ policy uncertainty - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, suggests that the global asset markets have been more volatile this week, with the clearest trend of higher global bond yields spilling over to a correction in global equities and EM and commodity currencies.

Key Quotes

“This makes sense because low and falling global yields had forced investors into these higher risk assets.  A developing rising trend in yields is causing this yield-seeking capital to retreat from higher risk assets.

The JPY has been buffeted by two opposing forces.  On one hand, the increasing prospect of operation twist in Japan is tending to weaken the JPY.  On the other, weaker asset markets are reviving the traditional pattern of supporting JPY as a safe haven.

However, JPY has strengthened all year despite strong asset markets much of the year.  The market has preferred to use the USD as the funding currency for riskier investments.  As such, with asset markets now under pressure, because of upward pressure on global bond yields, we may find the JPY weakens against a broadly stronger USD.”