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Why Is the Japanese Yen a Safe-Haven Currency?

June 19, 2016

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Japanese yen pushed higher by Fed, safe-haven flows amid Brexit fears

Recently there have been a lot of headlines regarding the Yen’s strength (FYI- there’s a distinction shared by the Swiss franc which is also often considered a safe haven currency but that is a another story..) due to market uncertainty surrounding the Brexit issue.

Two factors I wanted to touch on that explains the dynamic of why the Yen is considered a “safe haven” currency:

  • Japan has always been a large exporter and has continually exported significantly more goods and services than it imports. The result has been decades of current account surpluses that have positioned Japan as a net creditor to the world. Japan also has the highest debt-to-GDP levels, however, as investopedia stated: traders often balance the high debt level of Japan with its high trade surplus.

 

  • The Yen is a favorite to finance currency carry trades since Japan’s interest rate is so low (note at the time of this writing BOJ recently adopted a negative interest rate policy; Japan’s current interest rate is -0.01%). From Investopedia: A carry trade is a strategy in which an investor borrows money at a low interest rate in order to invest in an asset that is likely to provide a higher return. This strategy is very common in the foreign exchange market. So in other words, investors can borrow Yen at a very low interest rate and buy a higher yielding asset/and/or currency.

 

Sources:

http://www.investopedia.com/articles/forex/japanese-yen-what-fx-traders-should-know.asp

http://www.financialsense.com/contributors/matthew-kerkhoff/why-japanese-yen-safe-haven-currency

http://www.cnbc.com/2016/06/16/japanese-yen-pushed-higher-by-fed-safe-haven-flows-amid-brexit-fears.html

 

 

Emerging markets advance on speculation China will support expansion

April 8, 2014

Emerging-Market Stocks Rise to Four-Month High on China

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  • The MSCI Emerging Markets Index added 0.7 percent to 1,011.49, increasing for a third day.
  • The iShares MSCI Emerging Markets Index ETF advanced 1.2 percent to $41.96.
  • Brazilian stocks halted gains due to investors noticing inflation rates are increasing with the current President.
  • The chinese government will support the expansion to address the concern over weak economic growth and help support commodity prices along with emerging markets.
  • Brazil’s Ibovespa dropped from the highest level since November as Petrobras sank 2.9 percent.
  • Russia’s Micex Index rose 0.2 percent, rebounding from a drop of as much as 1.1 percent earlier.
  • The rand climbed after foreign investors bought South African bonds.

Emerging markets decline amid concern on Ukraine crisis

April 3, 2014

Emerging-Market Stocks Halt Nine-Day Advance on Warning

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  • Emerging markets declined after NATO warned Russia to reduce its troops on Ukraine territory.
  • Russia’s Micex Index (INDEXCF) extended its slump this year to 9.2 percent as Sberbank sank, while the ruble weakened for a second day. Ukrainian Eurobonds fell for the first time in almost two weeks and the hryvnia slumped.
  • Turkish bonds ended the longest streak of gains in 11 months amid speculation the central bank will raise interest rates.
  • Brazilian shares retreated amid speculation recent gains might have been excessive given the outlook for slow economic growth
  • China’s stocks fell for the first time in three days as banks and property developers slumped, overshadowing government measures to support economic growth.
  • The iShares MSCI Emerging Markets Index ETF fell 0.4 percent to $41.41.

Emerging Markets rally after Yellen’s positive comments

March 31, 2014

Emerging Stocks Set for Longest Rally Since July on Fed

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  • Emerging Markets gained as Yellen signaled that she will continue QE because the US economy is still weak.
  • Indian stocks climbed to a record, led by metal companies and automobile producers.
  • The Ibovespa advanced as meatpacker Marfrig Global Foods SA (MRFG3) led Brazilian exporters higher amid eased concern that the global economic recovery will falter.
  • Russia’s Micex Index jumped to a month high as the nation’s foreign minister met with his U.S. counterpart.
  • Turkey’s lira led gains among world major currencies on speculation Prime Minister Recep Tayyip Erdogan’s party victory in local elections may arrest foreign capital outflows.

Emerging Markets gain

March 27, 2014

Emerging Stocks Advance as Ibovespa Leads World Gains

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  • The Ibovespa rose the most in six months as state-run companies including Centrais Eletricas Brasileiras SA rallied as a poll showed President Dilma Rousseff’s approval rating fell before October elections.
  • The MSCI Emerging Markets Index increased 0.7 percent to 975.29.
  • State Bank of India surged after Goldman Sachs Group Inc. raised its recommendation. Egypt’s EGX 30 Index slumped the most in the world after the military chief confirmed speculation that he’ll seek presidency.

Asian shares rise due to Yellen’s speech

February 11, 2014

Asian Shares Rise on Yellen’s Comments

  • Asians markets rallied as Yellen said she would continue Bernanke’s stimulus program. But she will gradually trim the program as she starts to see the growth in the U.S. economy.
  • Also U.S. Congress passed a bill which would suspend the country’s limit to borrow, which positively affected the markets because before during budget talks due to disagreement caused the U.S. government to shutdown which weighed down the global markets.
  • China will release their Trade Data tomorrow which will reflect how their exports are doing, analysts expect it to increase by 0.1%.

European stocks rally due to Yellen’s speech and strong retail sales

February 11, 2014

European Markets Finished Higher After Yellen’s Remarks

  • European markets rally after Yellen’s speech that she will continue the stimulus program, but it will slow down gradually. Due to the continuation of the program it will allow interest rates to be low which can lead to more borrowing and money in the economy to promote growth.
  • Retailers were among the best performing stocks in London, following the January sales data reported by the BRC. Retail companies such as Sports Direct International increased by 3.36 percent and Next gained 2.00 percent. Marks & Spencer climbed by 3.25 percent and Kingfisher added 3.20 percent. Which shows consumers are spending which can help stimulate growth.

China and Japan’s stocks surge

January 22, 2014

China Shares Gain for Second Straight Session on Hopes for Further Liquidity Injection

  • China’s stocks rise after investors expect PBOC (Peoples Bank of China) to inject more stimulus into the Chinese economy, which is bringing confidence into the market and encouraging investors to put their money back into the stock market.
  • Japanese shares rose after Bank of Japan announced that it is winning the battle against deflation, and it will delay injecting any further stimulus into the economy.

European stocks rise as shares of ASML and Peugeot rise, with unemployment in UK dropping

January 22, 2014

European stocks up; ASML, Peugeot surge

  • European stocks rise after ASML and Peugeot shares surge. Shares of ASML rise because first half of 2014 and posted a 62% rise in fourth-quarter net profit. Peugeot shares rallied  5.8% after Moody’s Investors Service said the auto maker’s planned 3 billion euro ($4.1 billion) capital increase is a positive for its credit rating.
  • The unemployment rate in UK dropped more than expected as investors try to digest the possibility that Bank of England rising interest rates since they’re seeing growth in the economy. The joblessness rate for the three months to November fell to 7.1%.

Asian markets up, Japan rebound and China ease concerns

January 21, 2014

  • Chinese markets climb after Bank of China announced that central bank intended to add 255 billion yuan ($42.13 billion) to the money markets.
  •  Japanese stocks climbed on the back of a softer yen, which means a softer yen helped Tokyo-listed exporters notch higher. Investors are optimistic that a weaker currency boosts in the earnings outlook of export-oriented firms.