The Japanese yen outperformed, as usual, as risk aversion remained the dominant trend in the markets.
In fact, according to our latest forex correlations report, pairs like USD/JPY remain highly sensitive to the DJIA as evidenced by the similarly choppy price action in both today. At the end of the day, the Japanese yen finished up over 1 percent against the euro and US dollar, roughly 3 percent versus the Canadian dollar and British pound, more than 5 percent again the New Zealand dollar and a whopping 7.21 percent against the Australian dollar. Meanwhile, the Bank of Japan was one of the only major central banks to not cut rates in the coordinated move today, though they did issue a statement of strong support. Indeed, with interest rates at an ultra-low 0.50 percent, the Bank of Japan has little room for maneuver. Going forward, the odds remain in favor of Japanese yen strength as the unprecedented actions by the world’s biggest central banks had little impact on the markets, and tonight at midnight the SEC’s ban on short-selling of financial stocks will come to an end. The end of the ban isn’t expected to trigger a surge in short-selling, since the practice is now more expensive and financial shares have fallen so much that even the biggest bears may not find it worthwhile to sell. Nevertheless, it is clear that investors remain very jittery, leaving traders unlikely to pile back into carry trades like the Japanese yen crosses. My long-term bias for the Japanese yen: bullish. Related Article: Forex Correlations Show US/Dollar Japanese Yen Highly Sensitive to DJIA, Central Banks Could Fail to Restore Investor’s Confidence, We Expect Further Losses on USD/JPY Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.