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JPY Daily News
Japanese Currency a Safe-Haven in Times of Financial Turmoil
The yen is headed for its biggest weekly gain versus the dollar on speculation a global stock market rout will prompt investors to pare holdings of higher-yielding assets funded with JPY. The yen rose to 98.86 per dollar, headed for a 6.8% gain this week. Apparently the market's trend is to buy the yen as the credit crunch is spreading from the financial sector to other companies, meaning currency traders can't take on more risk. The yen is probably going to continue strengthening since continued financial market volatility is now spilling over to concern about global growth outlook.
Despite the synchronized cut in borrowing costs around the world this week, fears are still growing that the global economy is shifting toward recession. This move is seen as too little and too late, and investors doubt that the meeting of the G7 nations later today will achieve much. As a result, the Japanese currency has become a refuge from the worsening financial crisis. The yen is gaining in these times of financial turmoil as investors unwind carry trades using the low-yielding Japanese currency to buy higher-yielding currencies. As the panic mode gripping investors deepens on fears that the global financial system is faltering, the Japanese currency has acted as a safe-haven. As with the other major currencies, unless today's G7 Summit produces positive results for the global economy, the JPY will continue its recent trend.
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