Safe havens are back on as yen surges in forex markets

Denise Jackson

The Japanese yen returned to its top spot as a safe haven over the course of the day.

With risk aversion off the cards ahead of a key conference for global central bankers, the so-called safe havens were back in demand.

It is expected that the Jackson Hole Symposium, which is due to begin in Wyoming and which will continue into the weekend, will reveal some key insights into what central bankers around the world are thinking.

Jerome Powell, Chair of the US Federal Reserve, is expected to outline his views in a speech.

This comes after the minutes of the most recent Federal Reserve meeting, which saw interest rates cut by 25 basis points, revealed a divide between two sides within the Federal Open Market Committee.

One side believed that interest rate cuts were not desirable right now, while others considered it to be necessary to make the move now. The latter side won out. However, both sides agreed that interest rate cuts should happen at some stage in the future.

The markets absorbed this information with some surprise, and it led them to reduce the likelihood of a huge rate rise next year.

However, markets did appear to continue to expect that there would be a rate cut of over 60 basis points by the time 2020 begins.

The Japanese yen was the prime beneficiary of all of this, and it saw a rise of over a fifth of a percentage point during the day, reaching 106.29 yen at one stage.

The currencies which were really injured over the day were the so-called riskier ones.

The Australian dollar, for example, went down by a fifth of a percentage point in the AUD/USD pair, and at one stage reached $0.6768.

However, this was also influenced in part by events specific to Australia. Its deep trading partnership with Asia’s largest economy, China, meant that the change in the onshore yuan – which went down to its worst stage in 11 years against the US dollar – meant that the Aussie dollar was harmed.

Other currencies which saw declines over the course of the trading day included the Canadian dollar, which went down by 0.1% against its counterpart over the border.

The forex markets are now preparing themselves for two major events on the financial news calendar.

The first will be the Jackson Hole Symposium mentioned above, which is due to take place across the rest of the week and into the weekend.

Central bankers from around the world are expected at this event and are expected to discuss everything from the future of monetary policy to the state of the economy in their respective countries.

Other than the speech from Jerome Powell, no major events are scheduled. However, it is possible that fringe discussions and other debates will happen – possibly with the presence of journalists.

In terms of trade, the G7 meeting of finance ministers will occur later over the weekend. It is expected that some of the world’s most prominent politicians will meet here, including pro-tariff US President Donald Trump.

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