Treasury move perplexing but FX impact limited, for now
Many investors have been expressing confusion and concern regarding price action in Treasurys in recent sessions. Despite decently performing equity markets, robust US data and general signs of firm risk appetite, US yields are falling and ostensibly becoming a major headwind for the dollar. Regardless of the drivers behind the move, the suggested impact on exchange rates for now may be overblown. USDJPY aside, absolute sensitivities to US yield changes have fallen. However, we are more concerned about the impact of a positioning-led reversal and a repeat of H2 2014 price action.
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