A weaker Yen?

Politics are just a catalyst

“It is better to understand little than...to misunderstand a lot”

Anatole France

When I wrote about the Japanese Yen, back in March 2012, we were in the middle of a long awaited weakening phase of the currency: Usd/Jpy went from 76 to just above 84 in less than two months. If we exclude the wild volatility, in the end quite directionless, after the March 2011 earthquake/ tsunami, this early 2012 move has been the most important correction, in a multi-year Yen strengthening trend, since an early 2009 90 to 100 move. In March the market was focusing on the trade balance flipping negative after decades of surpluses. But with the European crisis regaining center stage again in late spring, things were soon back to normal, with the Yen once again successfully playing the safe-haven role. By late summer most of such a move was unwound with Usd/Jpy settling again well below 80. 

Once again the market is looking for a trend. And, among all major currencies, the Yen seems the only which could possibly deliver one. Obviously the risk is always the same: plenty of speculative positioning looking for a ‘trade’ and, after a few months, market goes back at the starting point with the only result being some more trading losses to recover. 

This time the catalyst has been different: political developments and, in the end, the perception that a ‘new’ Bank of Japan could be born in a few months.