The yen, which hit a multi-decade low last month, has recovered rapidly since then, but more turmoil could be in store if past turmoil repeats.
“There is clearly the potential for a correction on a similar scale to that seen in 1998-99, 2002-04, 2007-11 and 2016,” said Kit Jacks, chief currency strategist at Societe Generale. It is,” he stressed.
The yen has risen further in recent days as the new coronavirus infection spreads in China.aggravationThis is partly due to the fallout from risky assets hit in the US. The yen has regained some of its safe-haven status, which has faded in recent months due to the focus on interest rate differentials.
While the Bank of Japan kept its key rate close to zero, the move by other central banks to raise interest rates weighed on the yen, but the US Federal Reserve and other central banks are now assumed to stop hiking interest rates. There has been a lot of talk about the level of the dollar, which has eased some of the upward pressure on the dollar.
The yen gained more than 7% against the dollar in November, the largest gain among G10 currencies and more than 10% above its multi-decade low on Oct. 21. The yen outperformed again on the 28th due to the expansion of protests against the zero-corona policy, which completely suppresses the novel coronavirus in China, and was temporarily 1.2% higher at 1 dollar = 137.50 sen. maximum of three months.
Société Générale’s Jax, in a note to clients on Wednesday, specifically recalled the 1998-99 classes. At that time, the dollar/yen exchange rate fell from above 147 yen to below 102 yen, then bottomed out and recovered to around 135 yen in 2002.
Jax said Japanese investors have become “substantial sellers” of foreign bonds this quarter. “That’s no surprise at a time when geopolitical issues, energy prices and the Bank of Japan’s current policy stance aren’t dominating the market, and it’s good for the yen.”
news-rsf-original-reference paywall">Original title:Resurgent yen at risk of even bigger moves if 1998 is any guide(extract)
