USD/JPY: Narrow ranges to persist – JP Morgan

Dhwani Mehta FXStreet

In the latest client note, the analysts at JP Morgan argued that the Japanese yen is seen losing its safe-haven status over the last three years.

Key Quotes:

“USD/JPY annual range of less than 10% for three consecutive years.

2019 range less than 8%, the smallest since 1980.

When a risk-on mood was strong, market participants would normally actively engage in the yen-carry trade.

But when risk-off hit "investors would be pressed to close their positions" - to sell the higher-yield currency & buy back yen they had sold, which is why the yen would strengthen in risk-off environments.

But because in recent years the yen is no longer being sold off in the first place, it is not acting as much like a safe-haven currency as in the past.

If interest rates increase in other countries (opening a wider gap with rates in Japan) would encourage yen-carry trades.”

Gold and yen to keep safe-haven status: Traders' fear-favorites unlikely to change in 2020

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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