It all started with stocks last month, as NVIDIA sent the stock into overdrive. Since then, prices such as gold and Bitcoin have soared to record highs. And earlier this week, bond markets responded similarly, with U.S. Treasury yields briefly falling. Now, currency traders are finally starting to move towards a weaker dollar.
In particular, USD/JPY has fallen from around 150.00 to the current 148.50 level. This decline also resulted in price movement from the technical box outlined here yesterday. While some hawkish tweets about the Bank of Japan are driving the yen’s strength, the decline in USD/JPY is also partly due to movements in the bond market.
USD/JPY vs. US government bond 10-year yield (%) hourly chart
This is an important development to note, as the 10-year Treasury yield not only fell below 4.20%, but also broke its 200-day moving average, which currently stands at 4.178%. So this is weighing on the dollar overall.
And given the correlation with central bank outlooks, lower interest rates are also a boon for risk assets at this point.
Returning to FX, USD/JPY is not the only currency that has been moving since yesterday. EUR/USD remains at a 6-week high around 1.0900, while AUD/USD is also currently battling a 2-week high around 0.6580-95.
