💹⚖️Yen And Rate Diffs Most Negatively Correlated Since 2020: Cable FX Macro

• The chart below serves as visual guidance on the extent that the USD/JPY exchange rate has detached from rate differentials. U.S. Treasury 2-year and JGB yield spread are recording the most negative correlation coefficient since 2020. Historically, this negative relationship does not tend to last long.

• Tuesday session saw a rise on topside structures interest, while hedge funds were reportedly seen buying the spot long. We're far from intervention levels, but the extent of the dislocation comes to question how much can the spot rise as yield differentials do not favor the USD.

• A Swiss desk was seen stopped out USD/JPY short at 151.55, strategists had seen the yen re-engaging with rates. The desk warned that a U.S. market selloff may be needed before they decide to re-entry this trade.