JP Morgan on the yen – narrow ranges to persist

JPM client note on the Japanese yen, say its losing its attraction as a safe haven play

USD/JPY annual range of less than 10% for three consecutive years

  • 2019 range less than 8% (smallest since 1980)

Yen:

  • “when a risk-on mood was strong, market participants would normally actively engage” in the yen-carry trade
  • but when risk-off hit “investors would be pressed to close their positions”  – to sell the higher-yield currency & buy back yen they had sold, which is why the yen would strengthen in risk-off environments 
  • “But because in recent years the yen is no longer being sold off in the first place, it is not acting as much like a safe-haven currency as in the past”

JPM on what will prompt wider ranger:

  • if interest rates increase in other countries (opening a wider gap with rates in Japan)
  • would encourage yen-carry trades

Yeah 1980 might have been a narrow range but as the 80s went on things did hot up (check your historical charts …. google the Plaza Accord)

Probably not about the yen range but its from the 80s (ok, 1979)

ForexLive

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