JPMorgan says one of the most profitable foreign-exchange themes of the year — backing currencies with stronger fiscal positions — has lost momentum in recent weeks.

The bank notes that investors who favoured fiscally robust currencies such as the Swiss franc, Norwegian krone, Swedish krona and Australian dollar over weaker peers like sterling and the yen have enjoyed strong relative returns this year. But that “fiscal factor” has underperformed over the past month, even as long-end developed-market bond yields steepened in unison on rising term premium.

According to JPMorgan, the drag has come from adverse moves in front-end yield differentials, which have offset the supportive backdrop from fiscal fundamentals.