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11 Mar 2013
Forex Flash: Interest Rate differentials guide dollars leg up - BBH
Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman feels that the best explanation for the latest leg up in USD is growth differentials mediated by interest rate differentials.
He feels that the US-German 2 year note continues to do a good job tracking EUR/USD, while the 10 year spread between US and Japan is highly correlated to USD/JPY. He continues to write, “The US-German 2-year differential averaged 18.5 bp over the past week, the highest weekly average since early January. In the past week, the US 10-year yield rose nearly 20 bp, which the Japanese 10-year yield rose 3 bp. The 10-year spread of 142 bp is the largest US premium since August 2011.”
He feels that the US-German 2 year note continues to do a good job tracking EUR/USD, while the 10 year spread between US and Japan is highly correlated to USD/JPY. He continues to write, “The US-German 2-year differential averaged 18.5 bp over the past week, the highest weekly average since early January. In the past week, the US 10-year yield rose nearly 20 bp, which the Japanese 10-year yield rose 3 bp. The 10-year spread of 142 bp is the largest US premium since August 2011.”