According to Jane Foley, Senior FX Strategist at Rabobank, the performance of the USD during the summer opened a debate as to whether the greenback has taken the place of the JPY and the CHF as the most favoured safe haven currency.
Key Quotes
“We have maintained that when sentiment really turns nasty that the JPY will remain the market’s safe haven of choice. This arguments has been given credence by today’s strong performance of the JPY.”
“On a one day view the JPY is the best performing G10 currency. The solid performance of the yen follows the heavy pressure exerted on stock markets indices over the last 24 hours or so. The US may be one of the few major economies to be able to boast positive year to date gains in its main equities bourses, but yesterday a combination of concerns over global growth, USD strength, trade wars and the Saudi diplomatic issue created a strong drag on sentiment, pushing USD/JPY lower. It can be assumed that if US stocks bounce higher USD/JPY will follow. However, if ‘risk-off’ sentiment continues to undermine US stocks, the JPY will likely be better supported.”
“Aside from the levels of risk appetite in global markets, the outlook for the JPY may be impacted by the forthcoming BoJ policy meeting scheduled for October 31. Speculation has been building as to whether the BoJ may offer a policy tweak in order to support the financial sector. This could take the form of potentially allowing yields in very long dated JGBs to rise a little further. That said, it its semi-annual financial system report released this week, the BoJ appears to have signalled that it is comfortable with the lending behaviour of the sector even though many continue to lose money on loans.”
“In July, the BoJ allowed a wider range of movement in yields though it adhered to its huge QQE programme. Any further tweaks could influence the outlook for the JPY, though we expect that in the coming weeks the overall tone of risk appetite in US equities is likely to have a greater influence on USD/JPY. We expect the currency pair to end the year close to the USD/JPY 113 level based on our assumption of broad based strength has further to run.”
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 assets. 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 Open Markets 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. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.