Dollar & Bond Yields Are Plunging

US equity markets are quietly doing what they do – go up and stay up. But in the biggest markets in the world – US Treasury, Japanese bonds, and foreign exchange – something turmoily is happening. Yields are cratering today.. The USDollar is getting hammered on the back of JPY gapping dramatically stronger and EUR surging.

USDJPY is perhaps the most notable…

As WSJ reports,

Some Bank of Japan officials have grown more concerned about the drawbacks of a weak yen, making them increasingly cautious about the central bank undertaking additional quantitative easing, according to people familiar with their thinking.

These officials are worried that a further sharp decline in the currency could hurt Japan’s fragile economic recovery by damping consumer spending, which accounts for around 60% of gross domestic product, the people said.

This week, BOJ policy board member Yoshihisa Morimoto said the additional easing introduced in October has had an “impact on households’ purchasing power somewhat.” The yen has fallen to ¥119.75 against the dollar, from around ¥109.20 at the time the further stimulus was announced. Mr. Morimoto was one of four board members who voted against taking further action in October. The vote was 5-4.

Worried that a weaker yen could frustrate households, particularly ahead of local elections in April, the Japanese government has started signaling that it doesn’t want the BOJ to rush to achieve its inflation goal.

“If they rigidly stick to the ’two year’ time frame and take additional easing measures in the hope of reaching the target, that could have an impact on foreign-exchange rates,” a person familiar with the government’s view told The Wall Street Journal recently. “If the yen falls to ¥130, ¥140 that would be considerably away from its PPP exchange rate.”

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EUR is surging… (Ukraine “deal”? come on!! Europe? – more like massive overcrowded trade being unwound and SNB help)