Risk Off - JPY Rallies

Published date: 10/10/2018

Sentiment in the equity markets has been roiled yet again with some heavy losses seen on Wall Street today. Whether this is a function of the fears in Europe, Brexit or the result of higher interest rates in the US is hard to determine, however investors are running for the hills.  

This hits the JPY pair as Japanese investors have divested out of Japan and into other developed countries with more attractive dividend and yields.  With the BoJ still printing money, more buying of foreign assets follows - only as long as prices are going up.  Now that stock markets are falling, Japanese investors are expected to repatriate - ie, buy back their foreign currencies into JPY and so we see the impact on the relative currency pairs as a result.

Up until now, USD/JPY has been shielded from risk off sentiment as the USD has been seen as a safe haven also.  When US stocks fall, however, it is hard to stick with the greenback as it is US assets which are being sold off.  

Looking elsewhere, USD/CHF is sticking to its tight range above the 0.9900 level and refusing to give way, so traders are fighting hard to keep the USD from giving up too much ground.  Similarly, EUR/USD is being contained below the 1.1540-45 area so we see renewed pressure on EUR/JPY, though along with GBP/JPY, is net higher on the day.  

AUD/JPY is a prime target though and is back under 80.00 despite seemingly attempting to form a base at these levels over the last few days.  AUD/USD is looking heavy again as a result, with the move above 0.7100 struggling as a result. 


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