The rebound in U.S. bond yields on Thursday boosted the dollar, which is quietly resuming its climb higher. It is now up four days in a row, eyeing its best week since early September, and has appreciated in 14 of the last 17 weeks.
Since mid-July, it has gained 6.5% on a broad basis. One of the dollar’s best runs has been against the Japanese yen – the dollar is now up more than 10% in that period to within one yen of the three-decade-high near 152.00 yen hit late last year.
Traders remain on high alert for yen-buying intervention from Japanese authorities, but that could just as easily come against the euro, which rose to a fresh 15-year high on Thursday of 161.80 yen.
The last time euro/yen was that high in August 2008, euro/dollar was $1.50 (it’s $1.0650 today), dollar/yen was 110.00 (it’s over 150 yen today) and the U.S.-Japanese 2-year yield gap was 150 basis points (today it is almost 500 bps).
It’s pretty clear that, from a fundamental and yield spread perspective, the yen is much weaker today than it was then and that the dollar is much stronger. This may be one of the reasons why Tokyo seems reluctant to intervene.
