Lower yields support the yen

SocGen's Kit Juckes is out with a note today making the case for buying the yen on lower sovereign yields. The note was out before Draghi but talk of lower ECB rates only adds to the case to buy the yen.

With uncertainty high and yields low, it's not such a big surprise that gold and bitcoin prices are at their best levels in over a year, and that's a fair enough reflection of a weak dollar in a currency market where alternatives are what lacks the most. Crypto currencies have all the qualities of a fad, which is a way of saying I haven't a clue what their prices will do and won't buy, but the gold rally can persist. The yen really ought to benefit as well, more than it already has. CFTC data don't suggest crowded positions, but price action definitely doesn't suggest the market is short yen. We're going to have to be patient for a while longer but unless we see a huge about turn in the bond market, the tide has turned in the yen's favour.

USD/JPY tried to rally today on trade hopes but has sagged back down into negative territory and is lower by 10 pips to 108.44.

In the bigger picture, he says the signal from the market is that the dollar is to be sold, we just need to find something worthwhile to buy it against.