The yen fell by nearly a percent yesterday against the US dollar – its biggest one-day fall in six weeks – as investors regained their appetite for risk amid an easing of the tense situation surrounding North Korea.
The yen, which has long been considered the FX world’s premier safe haven, typically falls in value against other currencies during periods of geopolitical stability and rises with uncertainty. As markets have returned to “risk-on” in recent days, the yen has fallen (USD/JPY has risen) to the upper 110s, from levels around 108.7 on Friday.
The yen wasn’t helped yesterday by data showing US retail sales growth at its highest since December; nor by Fed member William Dudley’s comments to the Associated Press in which he said “I would be in favor of doing another rate hike later this year.” The dollar gained broadly on the day.
Against the dollar, the yen remains up in 2017 by nearly 6% but has been pretty directionless for much of the year. Since March, the yen has traded down, up, down, up and down again, within an approximate range of 108.5-to-115. And given exchange rate movements in recent days, the currency appears ready to fulfil its next “up” leg. A further fall in the yen to at least 114 in the short-term – a fall of 3% from today’s rate – now seems likely.
Against the euro, the yen continues to struggle, although the same can be said for almost any other currency at present. With EUR/JPY rates just below 130 on Wednesday, Japanese holidays haven’t been this cheap for Europeans since early 2016. The euro rally shows no signs of stopping, with speculation still rife that the European Central Bank will soon begin removing monetary stimulus (scaling back on quantitative easing).
The yen fell against all other FX majors yesterday, including falls to 86.54 against the Australian dollar and to 142.4 against the British pound.
The yen even managed to fall against the Philippine peso, which itself has gone off a cliff over the past week. Against the US dollar yesterday, the peso fell yet again to a fresh eleven-year low, which is now 51.66. The peso climbed marginally against the yen to buy 2.144, cementing the yen’s status as the worst performing currency of the day.
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