An expansion in the short-term yield differentials would make currency hedging more expensive for life insurers.

WSJ: Japanese Slow Sales of Assets Abroad

So instead of looking at short-term interest rates that are almost identical, investors are paying more attention to yield differentials in the bond markets.

ECONOMIST: Currencies

It concludes that the three most important determinants of the dollar's swings against the euro (or against the euro's component currencies before 1999) have been relative expected growth rates, bond-yield differentials and net equity portfolio flows.

ECONOMIST: The dollar