One of the upshots of this week’s events (and last week’s, accounting for OMT) has been a move out of safe-haven bunds and Treasuries and into higher-risk stocks, commodities and currencies and out of safe-havens like JPY and CHF.
The rise in yields in bunds and Treasuries has made the dollar and euro that much more attractive to investors. In an effort to boost economic growth, central bankers are keen to move money off the relative safety of the sidelines, as represented by bonds and into the economy, as represented by stocks. As risk rises, EUR/JPY and USD/JPY tend to tag along, with firmer yields helping Japanese investors and carry traders gain a margin for safety when holding those positions.
