JPY flows: Another new high in EUR/JPY - looks unsustainable
EUR/JPY hits another new high as S&P 500 also hits new high.
The S&P500 made another new all time high in the US yesterday, helping to drive the JPY lower and the commodity currencies higher, with EUR/JPY also hitting a new all time high and extending gains in Asia. The S&P gains came in spite of weakness in the NASDAQ due to the decline in Oracle shares after the latest forecasts. While strength in equities will tend to support the riskier currencies and undermine the JPY, it’s hard to justify the latest strength given the extreme valuations. In any case, it is not sustainable for EUR/JPY to rise with equities indefinitely. The previous relationship which held for much of the last 8 years with equity risk premia also has little fundamental justification, but is more sustainable. But on that basis, EUR/JPY should be significantly lower already.
