Is The Japanese Yen Still A Safe Haven Asset???

in hive-167922 •  last month 

Japan has one competitive advantage over most countries. Japan is a very large exporter. And over many decades, Japan has become the largest net creditor to the world. So during times of uncertain, capital flows out of other currencies and into the Japanese yen, causing it to strengthen. This is way the Yen is considered a safe haven currency.

This week while the equity markets have gone down due to concerns that the coronavirus will slow down the global economy, I have witnessed bids for bonds, gold, silver, the US dollar (and Bitcoin might I add), but the Japanese Yen has actually declined.

The rally in U.S. equities took a pause and the strong dollar got stronger on Thursday, rising to a three-year high against a basket of trading partner currencies, after a steep slide in the Japanese yen called into question its safe-haven status.

Gold prices hit their highest in seven years as investors sought safe-haven assets after a rise in the number of new coronavirus cases in South Korea.

"The strongest explanation (for the yen's decline) is a widespread selling by Japanese asset managers amid growing fears about the health of Japan's economy," said Raffi Boyadijian, investment analyst at XM.

The yen's slide is unusual because the exchange rate with the dollar has been shedding its close correlation to the price of gold and U.S. Treasury yields, a development to be watched, he said.


Safe havens currencies retain or increase in value during risk off environments, meaning when economic turbulence is upon us. Three major safe haven currencies are the U.S. dollar, the Japanese Yen and the Swiss Franc. So the question becomes, is the Japanese Yen still a safe haven in today’s time or are we just witnessing the classic carry trade? A carry trade is a trading strategy that involves borrowing at a low-interest rate and investing in an asset that provides a higher rate of return.

Whatever is going on with the Yen, lets see where price is headed next?

Monthly Chart (Curve Timeframe) – monthly supply is at 0.0103 and monthly demand at 0.00805.

Weekly Chart (Trend Timeframe) – the trend is sideways.

Daily Chart (Entry) – the daily demand zone at 0.00912 couldn't not hold.

Thus, the chart suggests to use the breached zone as a flip zone, so if price pulls back, go short.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

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Coronavirus is the headline grabber right now.

Flying under the radar is the fact the Japanese economy is in recession. This could have longer term implications.

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Wall Street is saying the virus will impact just next quarter earnings, but I think it will adversely affect many industries much longer than that.

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