Gonçalo Moreira, CMT
Independent Analyst
One of the ways we have to monitor current capital flows is looking at development of the yen in recent trading and to track price behavior of some benchmarks priced in the Japanese currency.
On the 22nd, in a knee-jerk reaction to the BOJ headlines on negative interest rates the USDJPY was about to climb back into positive territory for the month, but from the 28th on it has been all downhill after the BOJ disappointed markets by keeping its monetary policy setting unadjusted.
More recently, the Dax and German Bunds found that challenge just a step too far and finished last week with some of the losses recaptured, whereas major currencies such as USD and EUR kept an heavy tone against the yen.
In the equities world, Russel 2000 had similar modest end-of-week recoveries and seemed to contain the damage better of than the and 3000, the broad Wilshire or the Dow Jones Industrials Average.
This hints to what issues are holding the market up, besides from treasuries, notably small-cap stocks considered less risky. Commodities also kept its chin up when priced in yen. In dollar terms, gold flirted with January's highs, and Oil with its highest level since November last year. It is this combination which is casting a shadow on risk sentiment and the one to monitor these days.
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