USD/JPY approaches 160, driven by widening 2-year UST/JGB spreads
The Japanese Yen is grinding towards 160 against the USD, driven by the re-widening in 2-year UST/JGB spreads to 270bp.
This spread level is not insignificant technically and corresponds with the previous high of Nov-25, demonstrating that bond spreads hold greater sway over oil prices in the case of the Yen.
The currency trades within 1% of the intervention level of 160.72 in late April, with markets assuming a 25bp Bank of Japan hike in June, and the cost of JPY calls/USD puts has cheapened over the past three weeks from -1.67 to -1.07, in line with bond spreads.