Predictions that the yen would surge 10% as Japan eased its ultra-dovish monetary policy have failed to materialize. However, signals that the currency is nearing a tipping point are rising. Some international investors are diversifying their reasoning and increasingly banking their hopes for yen strength instead of adjusting their holdings, on the onset of a …
Predictions that the yen would surge 10% as Japan eased its ultra-dovish monetary policy have failed to materialize. However, signals that the currency is nearing a tipping point are rising. Some international investors are diversifying their reasoning and increasingly banking their hopes for yen strength instead of adjusting their holdings, on the onset of a worldwide recession.
According to JPMorgan Chase & Co. economists, as central banks are compelled to continue tightening amid higher-than-expected inflation, the chances of major economies collapsing are also increasing. With this, the Yen, which tends to benefit from safe-haven flows, appears chronically undervalued, with the currency’s trade-weighted, inflation-adjusted exchange rate hovering around 1971 lows.
Indeed, the dollar has risen approximately 3% this month, surpassing practically all other Group-of-10 currencies after doing poorly in the first half. In a five-day gaining streak, it surpassed the carefully observed psychological 140 per dollar mark on Wednesday. Investors appear to be planning for a stronger yen in the options market ahead of the Federal Reserve and Bank of Japan rate announcements later this month.
Risk disclaimer:
Please note that this article does not offer any instructions or suggestions regarding investment decisions. It is important for you to conduct your own research or seek professional advice from a qualified professional before conducting an investment decision.
