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Jun 02 - 10:55 AM

USD/JPY: The Return Of The Oil Correlation? - Credit Agricole

By eFXdata  —  Jun 02 - 09:30 AM

Credit Agricole CIB Research discusses the positive correlation between oil prices and USD/JPY exchange rate.

"Gyrating oil prices appear to have become a strong driver of USD/JPY once again. Indeed, USD/JPY has followed oil prices as well as UST yields higher so far this week and appears to be have been capped by the recent pullback in the price for crude on the back of a report that Saudi Arabia is ready to increase production if Russian output falls due to tightening sanctions," CACIB notes. 

"We have noted in the past, the fundamental reasons for such a positive correlation between oil prices and the exchange rate. First, higher oil prices are a large negative terms-of-trade shock for Japan and a modest positive terms-of-trade shock for the US. Second, higher oil prices are more likely to encourage the Fed to hike rates than the BoJ," CACIB adds. 

Source:
Crédit Agricole Research/Market Commentary

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