Japan: Hard to see a consistent relationship between global equities and JPY - AmpGFX

Greg Gibbs, Analyst at Amplifying Global FX Capital, explains that JPY has traditionally been considered as a safe-haven; rising when global asset prices are weakening and to some extent, this also comes through bond yields, since risk aversion generally results in lower global bond yields and a lower USD/JPY yield advantage.

Key Quotes         

“In fact, the relationship between JPY and global equities has been rather mixed in the post GFC era.  The fact is that JPY is not as routinely used as a funding currency for ‘risk-on’ trades as it was before 2007.”

“The JPY was highly correlated with the bond spread throughout 2017, and it paid little attention to the consistent strength in global equities.  In fact, up until January this year, broad USD weakness was associated with rising global equities, and the JPY participated in this move.  As such, USD/JPY fell despite a ‘risk-on’ mood.”

“The USD/JPY made a low for the year in March, and this may have reflected broad market equity upheaval.”

“In recent months, the JPY has tended to ignore further upheaval in EM equities.  On the other hand, US equities have been generally recovering.  As such, there has not been widespread risk aversion.  The environment has been more mixed.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.