The Japanese currency, as a true child of the “Land of the Rising Sun”, sometimes demonstrates an unpredictable character. Just yesterday, it, like an imperturbable samurai, remained stable, and today, it surprised the markets with a sharp rise and no less dizzying decline.
On Thursday, October 10, surprises began during the Asian trading session. The pair USD / JPY noted a strong volatility of the US currency against the “Japanese”. At some point, the yen strengthened sharply, and after a short period of time, it just as rapidly went down. This morning, the Japanese currency rose to the level of 107.52, and then slightly lost its position. At the moment, the pair USD / JPY is trading in the range 107.38-107.40, while maintaining a relatively even tone in the trading process.
Moreover, the tense situation surrounding negotiations between the US and China is considered by the experts to be the reason for such dizzying price “swings”. Information related to these negotiations is not always interpreted properly, which greatly affects the state of the market. Among the factors that provoked strong fluctuations in the market, experts attributed the misinterpretation of the actions of the Chinese negotiators, who recently arrived in the United States and are now returning home, that is, on the first day of the meeting with their American colleagues. This information was perceived by the market as evidence of a breakdown in negotiations. In addition, there was a short-term panic, and as a result of which, the demand for treasury bonds and the yen soared. It can be recalled that these assets play a protective role in reducing risk appetite and maintaining capital.
Meanwhile. The US currency in the pair USD / JPY is also has a hard time. On Wednesday, October 9, currency experts at Bank of America Merrill Lynch recommended selling the dollar in this pair, indicating clear signs of a slowdown in the US economy. In the financial institution, they prefer short positions in the US dollar and predict a pair drop to 100 yen per 1 unit of the American currency. If this option is implemented, the dollar may declined by 7% of the current price, warned by Bank of America Merrill Lynch.
According to analysts, the pair USD / JPY is sensitive to any change in the dynamics of stock markets, since the pair significantly correlates with the securities markets. A day earlier, the market reacted to a statement by Jerome Powell, the head of the Fed, who announced his readiness to increase the regulator’s balance by buying bonds. Investors and traders, in turn, regarded this as the launch of a quantitative easing (QE) program. In case of realization of such a scenario, one should expect growth of stock markets and the next “roller coaster” of the yen, experts say.