Yen Price May Rise, Look Past BoJ, Eye Vulnerable Stock Markets

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Japanese Yen Fundamental Forecast: Bullish

  • Anti-risk Japanese Yen appreciated as SP 500 and global stocks sold off
  • JPY may look past status quo BoJ and continue to focus on risk trends next
  • Next week offers plenty of distractions, but more Yen gains may be in store

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In a week filled with prolonged adverse stock market volatility, the anti-risk Japanese Yen appreciated against most of its major counterparts. The funding currency often benefits when sentiment turns sour and the importance of preserving capital leads to an unwinding of carry trade exposure. This results traders buying back funding currencies, of which the Yen is a prominent one and it appreciates.

The chart below shows a Japanese Yen basket (composed of an average of USD/JPY, AUD/JPY, GBP/JPY and EUR/JPY) compared to the performance in the SP 500. I have also overlaid a US Dollar basket, showing the greenback appreciating as well.

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