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Japanese yen hits high points as risk aversion sets in

Chris Lee

The Japanese yen reached its best performance points in weeks on Wednesday and into Thursday as traders in the forex markets appeared to turn wholeheartedly away from riskier options.

The yen, which tends to be seen as a safe choice currency during times of turmoil due to Japan’s status as major world creditor, was up to its best performance in seven whole weeks against the US dollar.

It was at 105.985 at one stage.

In its pair against the single European currency, it reached a position of 114.43 for each euro at one point.

This represented a three and a half year high.

According to analysts, there were a whole host of reasons why the currency surged ahead.

In particular there were fears over the underlying tensions between the US and China, especially after more claims from the US government about the origin of the coronavirus.

There is some concern among those in the forex field that the two countries, which spent much of 2019 locked in a major spat and adding tariffs to goods from each other’s countries, could be about to go back down a similar road again.

Mike Pompeo, who serves as the US secretary of state (a post equivalent to foreign minister in other countries) in the administration of President Donald Trump, continued his criticism of China on Wednesday.

Trump himself said that he was keeping China under watch in relation to the so-called “Phase 1” trade deal, which the US and China signed back in January.

There was also a negative economic data release for the dollar to contend with.

It was revealed that private sector employers in the country had sacked around 20.2 million people over the course of April as a consequence of the coronavirus pandemic.

Elsewhere around the world, uncertainty was continually fueled by the decision of a German court earlier in the week to tell the European Central Bank that it had to justify its bond-buying scheme.

If it doesn’t, the court said, then the German Bundesbank – the national-level central bank – would pull out of a major stimulus scheme designed to prop up the Eurozone economy during the pandemic.

With all these uncertainty-inducing factors at work, then, the Japanese yen appeared to have a clear rise to the top.

In pairs not involving the yen, the dollar managed to gain some ground.

The single European currency, for example, was noted at $1.0799 against the greenback.

This came after it declined in value for three days in a row over the course of the week.

Over the water in the UK, the pound was down slightly in its pair against the US dollar as well.

It was seen at $1.2324 in this pair at one stage, which was its worst position for around a fortnight.

Emerging currencies also suffered from the risk-off environment, with Brazil’s real in particular experiencing a downturn.

It was down to 5.714 for each greenback.

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Chris Lee
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