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Does the yen still have a safe haven appeal? - BTMU

FXStreet (Łódź) - Derek Halpenny, European Head of Currency Strategy at the Bank of Tokyo Mitsubishi UFJ looks at yen's status as a safe-haven currency in the face of Japan's current economic situation.

Key Quotes

"If yesterday’s price action is a signal of a more pronounced period of risk-off, will the yen continue to strengthen given its safe-haven appeal? This is a tricky one to answer."

"Clearly, the momentum trade reversal would argue that it may have further to advance, just on that alone. But there must be some serious doubts over its safe-haven status."

"It remains a huge creditor nation and certainly any notable repatriation of Japanese investments abroad would argue that the yen would continue to strengthen. However, that repatriation flow may not happen – it didn’t in 2008-09."

"What helped the yen was the lack of fresh capital outflows that would have recycled the massive current account inflows. But those inflows have now disappeared. Japan’s current account surplus stood at JPY 25trn in 2007 heading into the financial crisis."

"Over the last twelve months, Japan recorded a deficit of JPY 0.6trn. Furthermore, the BOJ back then was not pumping massive liquidity into the financial markets like it is now under QQE. The yen’s safe-haven status is nowhere close to what it was heading in to the Great Financial Crisis of 2008-09."

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