The yen is taking a bit of a breather today after hitting a six-month low against the U.S. dollar yesterday. Today’s slight rise in the yen—0.57%–takes the yen to 102.37 to the dollar. Japan’s currency is down 14% for 2013 against the U.S. dollar.
The news on Iran has led to selling of Japanese yen, oil, and gold as investors and traders have decided that the world isn’t as risky a place as it was just a few days ago. The Japanese yen, the world’s favorite safe haven currency, fell 0.45% against the dollar to 101.71. West Texas Intermediate fell 0.89% to $94 a barrel and gold declined 0.17% to $1242 an ounce.
I think putting money into Japan on a forecast that the yen will be weaker in six months than it is today is still likely to pay off. But the trade is certainly not as simple as it was earlier in 2013
While weakness in the U.S. dollar—on a consensus Wall Street view that the Federal Reserve won’t begin reducing its $85 billion a month in asset purchases until March 2014—is getting all the attention, a falling yen is starting to renew the rally in Tokyo share prices
Looking for a vehicle for trading on U.S. chaos on the government shut down and a potential debt-ceiling default? Think Japan. Among developed markets Tokyo looks to be the most sensitive to shifts in U.S. sentiment thanks to the yen’s role as a safe haven currency.
Stocks climbed in Tokyo over night, with the Nikkei 225 closing up 2.57%, after Japanese Prime Minister Shinzo Abe said he might recommend a cut to corporate taxes to offset increases in the sales tax currently scheduled to begin to take effect in April 2014. An Abe advisor also suggested delaying the start of the increase in the national sales tax to later in 2014.
In the very short term Japan’s disappointing second quarter GDP figures have taken down share prices in Tokyo. In the slightly longer term, the negative news is likely to weaken the yen on speculation that the Bank of Japan will move to speed up policies designed to stimulate Japan’s economy by weakening the yen. And a weaker yen is good for profits at Japanese exporters and for Japanese stock prices in general.
The dollar is sinking against the yen and the yen is climbing as the Bank of Japan begins a two-day meeting. Nobody expects Japan’s central bank to do anything. But talk counts and the country’s financial markets seem to be counting on the bank to renew its pledge to double the monetary base
