Don\u2019t write off the yen as a haven.<\/p>\n\n\n\n
It\u2019s true that Japan\u2019s currency has failed to break out of a relatively narrow range against the dollar in recent years — despite a trade war, tensions in the Middle East and North Korea, Brexit and now a deadly viral outbreak.<\/p>\n\n\n\n
But a close examination of price moves, capital flows and Japan\u2019s overseas investments shows that the yen still offers a safe harbor in times of trouble.<\/p>\n\n\n\n
While it has climbed just 2.5% versus the greenback since the start of 2018, the yen has jumped 12% against a wider basket of its Group-of-10 peers.<\/p>\n\n\n\n
Japan has maintained its status as the world\u2019s biggest holder of foreign assets. In times of great domestic crisis, like the earthquake and tsunami of 2011, the yen can surge rather than slump as investors bring money home to rebuild.<\/p>\n\n\n\n
\u201cThe dollar\u2019s resilience is masking the yen\u2019s appreciation in times of risk aversion,\u201d said Tsuyoshi Ueno, a senior economist at NLI Research Institute in Tokyo. \u201cThere is no change to the yen\u2019s low-risk nature.\u201d<\/p>\n\n\n\n
But the changing composition of Japan\u2019s current-account surplus does mean that less money is being repatriated on a regular basis, reducing some of the upward pressure on the currency.<\/p>\n\n\n\n
The nation\u2019s trade balance has dwindled in recent years while financial investments abroad have climbed and manufacturers have set up more factories overseas. Unlike exporters, who typically buy yen to bring their earnings back to Japan, money tied up in factories and offshore investments stays put longer.<\/p>\n\n\n\n
A steady stream of international acquisitions by Japanese companies has bolstered this trend.<\/p>\n\n\n\n
Japanese investors hunting for higher-yielding foreign securities have also taken advantage of bouts of yen strength, capping gains. Portfolio flow data show that pension funds acquired a record amount of overseas bonds in January.<\/p>\n\n\n\n
\u201cIncome from overseas investments in principle doesn\u2019t come back to Japan,\u201d said Yukio Ishizuki, senior currency strategist at Daiwa Securities Co. in Tokyo. Along with dollar strength, this has contributed to the yen trading in a \u201cstale\u201d range, leading some traders to mistakenly question its haven status, according to Ishizuki.<\/p>\n\n\n\n
The yen has traded between 105 and 112 against the dollar in the past year. It fluctuated more against the euro over the same period, moving between 116 to 128.<\/p>\n\n\n\n
A correlation between moves in the yen and U.S. stocks also adds weight to the view about the currency\u2019s value as a hedge against risk. Whenever American equities begin moving wildly, the yen tends to get bought as a haven.<\/p>\n\n\n\n
Leverage funds have also cut their bearish bets on the yen to around the least since October last year, according to CFTC data.<\/p>\n\n\n\n
\u201cIt would be difficult to see the yen sold on risk-off,\u201d said NLI\u2019s Ueno. \u201cThe yen\u2019s status as a haven currency remains structurally intact.\u201d
<\/p>\n","protected":false},"excerpt":{"rendered":"
Don\u2019t write off the yen as a haven. It\u2019s true that Japan\u2019s currency has failed to break out of a relatively narrow range against the dollar in recent years — despite a trade war, tensions in the Middle East and North Korea, Brexit and now a deadly viral outbreak. But Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rop_custom_images_group":[],"rop_custom_messages_group":[],"rop_publish_now":"initial","rop_publish_now_accounts":[],"rop_publish_now_history":[],"rop_publish_now_status":"pending","_themeisle_gutenberg_block_has_review":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1916","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/forexvarsity.com\/welcome\/wp-json\/wp\/v2\/posts\/1916","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forexvarsity.com\/welcome\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forexvarsity.com\/welcome\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forexvarsity.com\/welcome\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/forexvarsity.com\/welcome\/wp-json\/wp\/v2\/comments?post=1916"}],"version-history":[{"count":1,"href":"https:\/\/forexvarsity.com\/welcome\/wp-json\/wp\/v2\/posts\/1916\/revisions"}],"predecessor-version":[{"id":1917,"href":"https:\/\/forexvarsity.com\/welcome\/wp-json\/wp\/v2\/posts\/1916\/revisions\/1917"}],"wp:attachment":[{"href":"https:\/\/forexvarsity.com\/welcome\/wp-json\/wp\/v2\/media?parent=1916"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forexvarsity.com\/welcome\/wp-json\/wp\/v2\/categories?post=1916"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forexvarsity.com\/welcome\/wp-json\/wp\/v2\/tags?post=1916"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}