The rise of the yen: everything is just beginning


Fans of the yen waited for their high point. The Japanese currency headed for strengthening, confidently pushing the American dollar from the podium. Fed Chairman Jerome Powell said that the regulator will adhere to moderate monetary policy in 2019. The official also pointed out the lack of a predetermined rate of increase in rates and made it clear that the actions of the Central Bank will depend on current economic data and the state of the economy, which analysts predict a slowdown

The yen ended 2018 in a big plus against the dollar, and it seems to continue this dynamic, as the market will begin to put in the prices the completion of the Fed tightening cycle. In December, the national currency of Japan gained 3.5% of the cost, and by the end of the year, it could rise in price to 100-105 from the current 108.


As a defensive asset, the yen is in demand during the deterioration of forecasts for the US economy and the fall in Treasury yields. Note that on the eve of the yield on 10-year securities passed the minimum level over the past 11 months, and greenback began to look less attractive. Most reputable banks, including Goldman Sachs, predict cooling in the US economy in 2019.

"The yen is growing primarily due to a decrease in yields in the US, the currency is very sensitive to this indicator. Recently, the yield on 10-year bonds has declined significantly, the same applies to the forecasts at the Fed rate for this year, "analysts Nomura comment.

They also added that in the case of zero dynamics of short-term profitability, "it will be difficult for investors to find a reason to buy the dollar against such currencies as the yen."

In addition, in the first three months of the beginning of the year, the greenback will be put under pressure to suspend the work of the government and reduce fiscal incentives. Do not forget that the intractable contradictions in Congress regarding the money for the construction of the wall on the border with Mexico blocked the work of the government and sowed panic in the markets. The demand for safe assets strengthened sluggish statistics on business activity in the manufacturing sectors of Europe and China, providing the incentive for the yen to achieve multi-month peaks.

The material has been provided by InstaForex Company -