USD/JPY Fundamental Daily Forecast – US Stock Market Plunge Returns Safe-Haven Status to Yen
The Dollar/Yen is trading lower for a third consecutive session on Tuesday as sellers continue to erase the huge spike to the upside which took place on February 19 and February 20. The price action suggests that those predicting the end of the Japanese Yen’s dominance as a safe-haven asset may have been wrong.
At 10:30 GMT, the USD/JPY is trading 110.372, down 0.350 or -0.32%
Back to Safe-Haven Status?
Given Monday’s steep sell-off in U.S. equity markets and the sharp break in the Dollar/Yen, it looks as if investors are treating the Japanese Yen as a safe-haven asset once again. The move on Monday clearly reflected a “risk-off” trade as the rising Japanese Yen rallied along with other traditional safe-haven assets like U.S. Treasurys, the Swiss Franc and gold. Yesterday’s rally in the Yen showed no evidence that investors might be discounting the Yen’s traditional safety value owing to Japan’s virus exposure.
BOJ’s Kuroda Blames Yen’s Steep Fall on Strong Dollar
Bank of Japan Governor Haruhiko Kuroda said on Saturday, February 22 the yen’s recent declines were largely driven by a strong dollar, shrugging off some market views that the widening coronavirus epidemic is triggering an outflow of funds from Asia.
Kuroda dismissed views held by some market players that the yen could be losing its status as a safe-haven currency.
“When you look at recent developments, the dollar is strengthening against the yen, the euro and various currencies including those in Asia, Kuroda said.
“It’s true there is uncertainty over the coronavirus outbreak’s impact on the Chinese, Asian and global economies. But I don’t think there has been a fundamental change in the exchange-rate market.”
Kuroda Remains Upbeat about Economy
Kuroda also said he had not changed his view that Japan’s economy would continue to recover moderately, suggesting that he saw no immediate need for the BOJ to expand stimulus.
“If needed, we will take additional monetary easing steps without hesitation,” he told reporters upon arriving at a Group of 20 finance leaders’ gathering in Riyadh.
“But the situation is still uncertain. I don’t think our scenario projecting a moderate economic recovery has been derailed.”
Daily Forecast
The next few days could be critical as to determining whether the Japanese Yen is still a safe-haven asset. Monday’s price action certainly supports the case for those who believe it is still a safe-haven. U.S. stocks plunged and the Japanese Yen rose sharply.
Furthermore, with the USD/JPY losing more than 50% of its surge last Wednesday and Thursday, it is starting to look like the spike to the upside was fueled by massive buying from the juggernaut Japanese Government Pension Investment Fund that was probably buying foreign bonds ahead of the end of the Japanese financial year in March.
This article was originally posted on FX Empire
