JPY - Equities Decoupling Ongoing - BarCap

Decoupling between JPY and equity markets continues and USD/JPY has now breached important technical levels topside, notes Barclays Capital. Another negative for JPY is that equities and bond yields have been moving in opposite directions, with equities declining but interest rate differentials moving dramatically against the JPY since the start of 2009.

The bank's FX Flow tool shows that while investors have been cutting long JPY positions, unwinding is yet to be completed. That said BarCap says it still looks for a JPY recovery, but a precondition of this is evidence of year-end positive flows from Japanese exporters and investors. USD/JPY now at 95.65.