JPY - Recent Performance
The Japanese yen spent much of 2017 trading up and down between 108 and 115 per US dollar, but has been the best performing G10 currency in early 2018. In the first seven weeks of the year, USD/JPY fell 6% to 106.11, marking the yen’s strongest level against the dollar in fifteen months.
The yen has also made back ground against the euro, strengthening by mid-February to rates in the low 132s; however, the yen remains weak against the euro by recent standards – EUR/JPY had been as low as 109.2 in mid-2016.
The yen’s strength in early 2018 will have surprised analysts at UBS. Entering the new year, the bank predicted that the yen would do worst of all the FX majors this year on the grounds that Shinzo Abe’s re-election in 2017 would likley mean a continuation of extremely loose monetary policy in Japan. UBS believed that the yen would weaken to levels above 115 per dollar.
“Analysts have struggled to explain why the yen is rising,” said the Financial Times in February, especially when the differential between US and Japanese interest rates continues to widen in favour of the dollar.
“I think [the reason for yen strength] is more technical,” said Citi analyst Koichi Kano.